NCLAT DISMISSES PLEA FOR RECOVERY FROM VIDEOCON

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NCLAT DISMISSES PLEA FOR RECOVERY FROM VIDEOCON 


JAYA SINGH 

NCLAT DISMISSES PLEA FOR RECOVERY FROM VIDEOCON

BACKGROUND-


Videocon Industries was admitted by the National Company Law Tribunal (NCLT) for insolvency proceedings. The first homegrown consumer durables company in India owes a consortium of banks led by the State Bank of India around Rs 20,000 crore. In three consecutive financial years until September 2008, Videocon's India business had registered standalone profits of over Rs800 crore with a focused approach in the consumer electronics business. Videocon's debt surged because of its failed telecom services business - it lost about Rs 7,000 crore in telecom - and the picture tube plant modernization in Gujarat that cost Rs 4,000 crore.

Meanwhile, the flagship consumer durables business also slowed down due to competition against global rivals like LG and Samsung. Over time, the market value of the fridge-to-phone company tumbled way down to Rs 600 crore. The decline started with Dena Bank classifying its Rs 520 crore loan to Videocon as an NPA in the quarter ending March 2017. The stock lost 42 per cent in the next three trading days.

The issue, in this case, arose from a production sharing contracts (PSCs) signed between the Government and four companies viz. Videocon, Vedanta and Ravva Oil (Singapore) Pte. Ltd. ("ROS"), for the exploration and development of oil fields. The oil extracting companies recover their capital and operational expenditures, from produced oil, known as "cost oil" and the remaining oil forms part of the 'profit petroleum'. The government, through the Petroleum Ministry, had issued a demand notice dated October 22, 2018, to Videocon Industries, raising a demand to assign and allocate 100% of the sale proceeds/oil and gas invoices in favour of the government with immediate effect. This was for recovering the provisional sum of $314 million together with applicable interest towards the unpaid government share of petroleum. The share of profit petroleum belongs to the Ravva Oil Field, in which Videocon Industries has 25% participating interest.

NCLAT DISMISSES PLEA FOR RECOVERY FROM VIDEOCON

CURRENT ISSUE (NCLAT DISMISSES PLEA FOR RECOVERY FROM VIDEOCON)-


NCLAT dismisses plea for recovery from Videocon Industries during the moratorium. The dispute arose between ‘Government of India’ and Videocon Industries Limited (Corporate Debtors) on 19th August 2002 which was referred to the ‘International Arbitration Tribunal’, which passed ‘Partial Award’ on 31st March 2005 upholding the ‘Videocon Industries Limited’ contentions and dismissing Government of India’s contention. Thereafter, the Government of India filed an appeal on 10th May 2005 before the Hon’ble Court of Kuala Lumpur, Malaysia which by its decision accepted the objections of Videocon Industries and held that it had no jurisdiction to hear the appeal and dismissed it.

  • NCLAT upheld the NCLT’S decision that Ministry of Petroleum can lodge its claim for any legally enforceable right of recovery through ‘resolution professional’ thereby not rendering it without any remedy.
  • It also restrained Chennai Petroleum Corporation Ltd.(CPCL), Mangalore Refinery and Petrochemicals Limited(MRPL), Bharat Petroleum Corporation Ltd.(BPCL) and GAIL India from remitting the amount from sale proceeds to the Union of India.
  • The Adjudicating Authority rightly held that it was concern about the enforcement of the provision of Section 14 of the I&B Code as per which after the declaration of ‘Moratorium’ prohibition is enforced from the recovery of any amount from the ‘Corporate Debtors’.
  • Prohibition is also towards the institution of any suit or execution of any judgment, decree or order of any court of law, Tribunal, Arbitration Panel etc. once the order of ‘Moratorium’ is passed.
  • It is open to the ‘Corporate Debtor’ to recover any amount as per law and award, if any, passed in its favour. It was in this background the Adjudicating Authority rightly held that during the period of ‘Moratorium’, Union of India, Ministry of Petroleum & Natural Gas, cannot recover any amount nor can issue demand notice to the Corporate Debtor through ‘Interim Resolution Professional’ to pay any amount.
  • The Adjudicating Authority rightly stayed demand notice dated 22nd October 2018 during the pendency of the resolution process as long as the ‘Moratorium’ is applicable on the ‘Corporate Debtor’.

CONCLUSION-


The Mumbai Bench of the MCLAT or consolidation of the resolution proceedings after the Delhi bench allowed a plea. It can be concluded that the Ministry of Petroleum can claim legal rights and also restrained remitting amount from the sale proceed to other petroleum units mentioned above. There is a complete prohibition to lodge any suit against the judgments and recover the amount in question from the 13 out of the 15 ‘Corporate Debtor’ till further proceedings.

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