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The Mumbai bench of the National Company Law Tribunal (NCLT) has questioned the haircut that creditors have to take in the Videocon Industries Ltd’s (VIL) resolution plan. The resolution applicant was paying close to the liquidation value to acquire the company, the tribunal noted in the order approving the resolution plan submitted by Anil Agarwal’s Twin Star Technologies.

The NCLT order also said the shares of VIL and Value Industries Ltd, originally Videocon Appliances Ltd, will be delisted from stock exchanges following the acquisition by Twin Star. This means the stock value will ultimately become zero, similar to what happened with Dewan Housing Finance Corp. Ltd’s shares.

VIL shares have been rising on the exchanges for the past few days after the announcement of Agarwal’s resolution plan. Individual shareholders hold more than 43% stake in the company, according to stock exchange data.

Registered valuers have valued the assets of the 13 companies at a fair value of 4,069 crore and at a liquidation value of 2,568 crore, NCLT said.

The consolidated resolution amount for 13 companies offered by Twin Star stands at 2,962 crore against the admitted claims of 64,838 crore. This accounts for only 4.15% of the total outstanding claim and a total haircut of 95.85% to all the creditors.

“Surprisingly, the resolution applicant also valued all the assets and liabilities of all the 13 companies and arrived at almost the same value as the registered valuers," the tribunal noted.

The liquidation value and fair market value are kept confidential and informed to the committee of creditors (CoC) only at the time of finalizing the resolution plan, as per regulations.

“Even in the present case, the resolution bids were opened in the 15th CoC meeting held on 02.09.2020 wherein liquidation value and fair market value were informed to the members of the CoC," the tribunal said.

“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 the Insolvency and Bankruptcy Board of India to examine this issue in depth to ensure that the confidentiality clause is followed scrupulously, without any compromise in letter and spirit by all the concerned parties and entities connected in the corporate insolvency resolution process," the NCLT observed.

While approving the resolution, the NCLT said the resolution applicant should increase the payout to operational creditors, especially micro, small and medium enterprises. “The successful resolution applicant is paying almost nothing and 99.28% haircut is provided for operational creditors. During the course of the hearing, it is also submitted that a voluminous number of operational creditors are also MSMEs and if they are paid only 0.72% of their admitted claim, in the near future many of these operational creditors may have to face insolvency proceedings, which may be inevitable," it added.

The resolution plan includes all the 13 group companies of Videocon.

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