The National Company Law Tribunal (NCLT) has ordered the inclusion of Videocon oil businesses in Brazil and Indonesia as part of insolvency proceedings being conducted in India, according to two people aware of the matter. The order is the first instance of overseas incorporated subsidiaries being brought under the ambit of local insolvency laws.
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.
Lender State Bank of India had appointed Deloitte as advisor for sale of Videocon’s stake in the Indonesia and Brazil blocks in August last year. SBI opposed inclusion of the assets as part of local insolvency proceedings at NCLT.
Videocon, an Indian-incorporated entity argued that loans taken by overseas subsidiaries were guaranteed by it, making the parent company the ultimate beneficial owner of those assets. Videocon and its promoter Venugopal Dhoot also claimed at NCLT that this was reason enough for them to be included in the local proceedings.
“This is the first case in the Insolvency and Bankruptcy Code where NCLT has held that the subsidiaries’ properties, if acquired by parent company’s resources, should be included as part of the insolvency process,” said Sandeep Ladda, a lawyer representing the Videocon group.
State Bank of India was yet to respond to ET’s queries as of press time Wednesday.
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So far, insolvency proceedings have been conducted independently for companies and their subsidiaries as they typically have separate sets of creditors. This has become problematic in cases where the parent and subsidiaries have interconnected businesses, such as in Amtek Auto’s insolvency as well as that of the Lanco group.
The Insolvency and Bankruptcy Board of India has been working on group insolvency laws to make it possible for bankers to explore resolutions for stressed corporate groups collectively, though these are yet to be notified.
Videocon’s bankers are considering an appeal against the NCLT order, according to sources. Their claims against the parent company and the overseas arms collectively amount to over ?50,000 crore. “The insolvency proceedings have begun and bidders have submitted expressions of interest based on the financials and assets of the parent company. Inclusion of these overseas assets could lead to unnecessary delays in the current process,” a bank executive said on condition of anonymity.
Videocon Industries has received expressions of interest from eight parties, including Haldirams, Vedanta and Indonesian billionaire Robert Hartono, ET reported on November 29. The parent company owns a consumer and home appliances business and also has a stake in the lucrative Ravva oil field. It also owns certain commercial buildings in New Delhi, Mumbai and Chennai.―Business Telegraph