SC agrees to hear Dhoot plea against separate insolvency for Videocon firms
The Supreme Court agreed to hear Videocon founder Venugopal Dhoot's plea challenging an NCLAT order that upheld separate insolvency proceedings for Videocon Industries and Videocon Oil Ventures. The court issued notice and scheduled the matter for further hearing on August 10
New Delhi: The Supreme Court on Tuesday agreed to hear Videocon founder Venugopal Dhoot’s plea against an NCLAT order upholding separate insolvency proceedings for two group entities – Videocon Industries Ltd. and Videocon Oil Ventures Ltd.
A bench of Justices P S Narasimha and Alok Aradhe issued notice on the plea of Dhoot and posted the matter for further hearing on August 10.
Dhoot has challenged a May 14 order of the National Company Law Appellate Tribunal (NCLAT), which set aside an earlier order of the National Company Law Tribunal (NCLT) that had directed clubbing of the two cases.
The appellate tribunal had said that creditors of Videocon Industries Ltd. (VIL) and Videocon Oil Ventures Ltd. (VOVL) had intended the corporate insolvency resolution processes (CIRPs) of the two companies to run independently, considering the distinct nature of their businesses and the need for a specialised resolution.
In this, Bharat PetroResources Limited (BRPL), a state-owned Bharat Petroleum subsidiary, has acquired VOVL, exercising its right of first refusal (ROFR), which was subsequently approved by the NCLT through a June 2024 order, while the CIRP of VIL is still pending.
The appellate tribunal had said in its order that VIL and VOVL operate in starkly different sectors – with VIL engaged in consumer electronics and VOVL in oil-related businesses – making it impractical for a single entity to possess the expertise required to revive both operations effectively.
The objective of the Insolvency and Bankruptcy Code (IBC) is to keep the corporate debtor a going concern besides the resolution of creditor dues.
The appellate tribunal had further said that the “decision was taken in the commercial wisdom of the committee of creditors (CoC), which should not be interfered with by the tribunal (NCLT)”. On February 12, 2020, while allowing a plea filed by Dhoot, the NCLT had directed the resolution professional to consider and treat all assets, property rights, claims and benefits of Videocon Oil Venture, Videocon Hydrocarbon Holdings, Videocon Energy Brasil and Videocon Indonesia Nunkan Inc. as assets and properties of VIL for the insolvency process.
Dhoot had sought that all foreign oil and gas assets be considered as assets of Videocon Industries. This NCLT order was challenged before the NCLAT by petitioners, which included public sector lender SBI, BPRL Ventures Indonesia and Pertamina Hulu Energi Nunukan Company, among others.
On February 19, 2020, the NCLAT stayed this NCLT order. The matter dates back to 2012, when VOVL and VIL availed of finances on an obligor/co-obligor basis from a consortium of lenders led by the State Bank of India (SBI). In 2016-17, Dhoot, group chairman and MD, approached the bank, requesting that VIL be removed as a co-obligor and instead be made a corporate guarantor so that it would not be required to show it as a primary liability on its balance sheet.
Thus, this structure was changed and VIL became a corporate guarantor. This step was taken in pursuance of the letters and Dhoot’s submission that foreign oil and gas assets were to be ring-fenced from the troubles being faced by the domestic business.
However, on June 6, 2018, a CIRP was initiated against VIL after the Mumbai bench of the NCLT admitted an application filed by the SBI under Section 7 of the Insolvency and Bankruptcy Code (IBC). On November 8, 2019, a CIRP of VOVL was also initiated. Dhoot later filed an application before the NCLT praying for the consolidation of the CIRP of VOVL with that of VIL and 12 other entities.
Dhoot later also filed a proposal under Section 12A of the IBC for the withdrawal of the CIRP against VIL and its 12 companies. However, it was rejected by the lenders with 98.14 per cent votes.
On December 11, 2020, a resolution plan was submitted by Twin Star Technologies (promoted by billionaire Anil Agarwal of Vedanta) and approved by the CoC and the NCLT, both in July.
Dhoot challenged this before the NCLAT by filing an appeal against the resolution plan approval, primarily on the ground that foreign oil and gas assets were not included. Rejecting Dhoot’s submission, the NCLAT said that “the entire journey by Mr Dhoot has been of flip-flops”, with contradictions in his stand.
The NCLAT said that Dhoot in 2016 and 2017 sought to remove VIL as a co-obligor to ring-fence the foreign oil and gas assets from the troubles being faced by the domestic business to avoid showing the said liability as its primary liability in the books of accounts of VIL.
