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NCLT raises doubt over confidentiality of liquidation valuation of Videocon

The bankruptcy tribunal has asked the Insolvency and Bankruptcy Board of India (IBBI) "to examine this issue in depth" to ensure that the confidentiality clause is followed without any compromise

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Bankruptcy tribunal NCLT has raised doubts over "confidentiality" of the liquidation valuation of the assets of Videocon Industries and its 12 group companies during the insolvency process.

The tribunal has asked the Insolvency and Bankruptcy Board of India (IBBI) "to examine this issue in depth" to ensure that the confidentiality clause is followed without any compromise.

The liquidation value of Videocon Industries and its 12 group companies was Rs 2,568.13 crore and fair value of the assets was Rs 4,069.95 crore. While the bid amount submitted by Twin Star Technologies in the resolution plan was Rs 2,962.02 crore.

The registered valuers have valued the assets of the 13 companies of Videocon group, having varied business interests ranging from oil and gas assets, consumer electronics and home appliances, telecom services, digital solutions, real estate and electronics retail chain.

"Surprisingly the Resolution Applicant (Twin Star Technologies) also valued all the assets and liabilities of all the 13 companies and arrived at almost the same value of the registered valuers," the National Company Law Tribunal (NCLT) observed.

As per the CIRP Regulations (Corporate Insolvency Resolution Process), the liquidation value is ascertained through two registered valuers and is kept as confidential along with fair market value. It is informed to the Committee of Creditors (CoC) members only at the time of finalising the bids.

In case of Videocon, the resolution bids were opened in the 15th CoC meeting held on September 2, 2020 wherein liquidation value and fair market value was informed to the members of CoC.

"Therefore, even if the confidentiality clause is in existence, in view of the facts and circumstances as discussed above a doubt arises upon the confidentiality clause being in real-time use therefore, we request IBBI to examine this issue in depth so as to ensure the confidentiality clause is followed unscrupulously, without any compromise in letter and spirit by all the concerned parties, entities connected in the CIRP," the Mumbai bench of NCLT said in its order passed on June 9.

A two-member Mumbai bench of the NCLT comprising members - H P Chaturvedi and Ravikumar Duraisamy - had approved the resolution plan by Twin-Star Technologies on June 9, and a detailed judgement was filed by the company on Tuesday.

The tribunal also suggested IBBI to frame "appropriate regulations, safeguards" for maximisation of value of the assets of the Corporate Debtors', which in turn will benefit all stakeholders.

"Since IBC is a nascent code we feel "this type of input may be useful to the IBBI as well as to the government to frame appropriate Regulations, Rules, etc," said NCLT.

In its 47-page-long judgement, NCLT while approving Anil Agarwal's Twin Star Technologies' Rs 2,962.02 crore-bid had observed that creditors of debt-ridden Videocon Industries Ltd will be taking nearly 96 per cent haircut on their loans and the bidder is "paying almost nothing".

Videocon Industries and its 12 group companies had a total admitted claims of Rs 64,838.63 crore. It has requested the Committee of Creditors (CoC) and Twin Star Technologies to increase the payout amount to these operational creditors as they are getting only 0.72 per cent of their admitted claim amount.

Many of the operational creditors are also Micro, Small & Medium Enterprises (MSMEs) and in the near future many of these operational creditors may have to face insolvency proceedings which may be inevitable, said NCLT.

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