Separate insolvency proceedings for Videocon Industries, Videocon Oil approved
What's the story
The National Company Law Appellate Tribunal (NCLAT) has approved separate insolvency proceedings for two entities of the Videocon group: Videocon Industries Ltd (VIL) and Videocon Oil Ventures Ltd (VOVL). The decision comes after overturning an earlier order by the National Company Law Tribunal (NCLT), which had directed the two cases to be clubbed together. The NCLAT ruled that creditors intended their Corporate Insolvency Resolution Processes (CIRPs) to operate independently due to their distinct business natures and need for specialized resolutions.
Business differentiation
One entity can't effectively revive both businesses: NCLAT
The NCLAT noted that VIL and VOVL operate in completely different sectors, with the former dealing in consumer electronics and the latter in oil-related businesses. This stark difference makes it impossible for one single entity to have the expertise to revive both businesses effectively. "One single entity would not have the expertise to revive these varied businesses," said Justice Yogesh Khanna and Ajai Das Mehrotra of NCLAT.
Tribunal's reasoning
IBC aims to keep corporate debtors as going concerns
The NCLAT emphasized that the purpose of the Insolvency and Bankruptcy Code (IBC) is to keep corporate debtors as going concerns while resolving creditor dues. It said creditors intended separate CIRPs for VIL and VOVL so different buyers with requisite expertise could handle their assets and revive their businesses. The tribunal said that this decision was taken in the commercial wisdom of the Committee of Creditors (CoC), which should not be interfered with by NCLT.
Asset consolidation
NCLT's earlier order was stayed by NCLAT
On February 12, 2020, the NCLT had directed the resolution professional to consider all assets and properties of VOVL, Videocon Hydrocarbon Holdings, Videocon Energy Brasil, and Videocon Indonesia Nunkan Inc, as assets and properties of VIL for insolvency. This order was challenged by SBI, BPRL Ventures Indonesia, and Pertamina Hulu Energi Nunukan Company among others before NCLAT. The appellate tribunal stayed this order a week later on February 19, 2020.