National Company Law Tribunal (NCLT) Mumbai’s bench comprising Suchitra Kanuparthi and Chandra Bhan Singh on February 13, 2020 ordered for inclusion of overseas Subsidiaryof Videocon’s Oil businesses in Indonesia and Brazil as part insolvency proceedings in India. This is first time that NCLT order inclusion of overseas assets of defaulter company in local insolvency proceedings.
“... we have concluded that foreign oil and gas assets of the group held through VOVL, VHHL, VEBL and VINI, are in fact, the assets and property of VIL…. Therefore, the assets held by them can be said to be ‘its’ assets, which is under the insolvency,” the order noted.
Judges also allowed a moratorium on the foreign petroleum assets of the group which will restrain its lenders from selling the conglomerate’s overseas assets. To which State Bank of India (SBI) responded that extension of moratorium to the overseas assets could delay recovery of money from sale of the assets. In addition, the order cited that since some time has passed in deciding the application, the time spent in deciding this application from August 22, 2019 until the date of the order, is added in the permitted timeline for the completion of the ongoing insolvency process.
The assets include stakes in overseas oil blocks held through Videocon arms incorporated in the Cayman Islands and British Virgin Islands. These were purchased after Videocon entered an agreement with state-run Bharat Petroleum Corporation Ltd. 14 years ago to search for foreign investment opportunities jointly. The two partners reportedly invested over $2 billion in development of the assets over the past six to eight years.
Lenders led by SBI in August, 2019 initiated a bid to sell overseas asset as collateral to money lender. For this action of SBI Venugopal Dhoot, Chairman and Managing Director of Videocon, moved to NCLT to put on hold on such action. Videocon’s lawyer argued that the proposed sale was outside the insolvency process of group entities, and lenders, including SBI, had opposed Dhoot’s plea. To which SBI opposed by saying that the overseas subsidiaries were the owners of the oil and gas assets. They said Videocon Industries had no rights over the assets.
“…. there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as a single economic entity,” the NCLT has said.
The flagship Videocon Industries’ debt stood at Rs 19,506 crore as of March 2018. The group is among the 40 largest defaulters identified by the Reserve Bank’s first list for insolvency in late 2016. The company has its core businesses in consumer electronics and oil & gas exploration, while the subsidiaries are into manufacturing, sale and distribution of consumer goods. The lenders plan to first auction the electronics business estimated to be worth $2 billion.
Author – Satwik Sharma