11 April 2019: In a likely first in India’s recent bankruptcy history, an appeals court has set aside a lender-approved resolution plan on the ground that the proposed upfront payment for the stressed asset, Indo-Malaysian joint venture United Seamless Tubular, was significantly lower than the average liquidation value.
The National Company Law Appellate Tribunal (NCLAT) said that the resolution plan approved by the committee of creditors (CoC) also discriminated against operational creditors, and did not give them the same treatment as it did to financial creditors. So, the court ordered the winning bidder, Maharashtra Seamless, to raise its offer to Rs 597.5 crore from Rs 477 crore.
Earlier, United Seamless and one of the dissenting lenders Indian Bank had moved the NCLAT, seeking action against the resolution professional (RP). They accused the RP of colluding with the bidder of his choice and favouring the bidder by undervaluing assets of United Seamless.
Hyderabad-based Kamineni group owns 60% of United Seamless, with Malaysia’s UMW group holding the rest in the joint venture. Its facility near Hyderabad manufactures seamless pipes used in the oil and gas and automotive industries.
NCLAT was responding to petitions filed by promoters of United Seamless and Indian Bank, challenging the NCLT order of January 21 that accepted the resolution plan of Maharashtra Seamless after the CoC approval. NCLAT was also responding to a petition filed by Maharashtra Seamless against February 28 orders of NCLT, which had refused to direct the police and district collector to take over charge of the debtor.