19 June 2019: With the National Company Law Tribunal (NCLT) yet to decide on Dhanuka Laboratories’ resolution plan for Orchid Pharma’s insolvency process, Chennai-based Accord Life Spec Pvt Ltd on Wednesday told the tribunal that it was ready to revise its proposal to Rs 615 crore.
Accord Life Spec is a part of the Rs 1,700 crore Accord group, established by Dravida Munnetra Kazhagam (DMK) leader and former Union Minister of State, S Jagathrakshakan. The group has diversified interests in medical education, technical education, hospitals, breweries and hotels. The company is also a player in specialty segments like generics and formulations for oncology and other therapeutic applications.
In an application filed with the Tribunal, Accord said that the decision of the Resolution Professional to propose Dhanuka Laboratories’ resolution plan, as approved by the Committee of Creditors (CoC), was procedurally illegal under the Insolvency and Bankruptcy Code (IBC).
Claiming that the resolution plan submitted by it was a viable one, Accord Life Spec said that it was “willing to revise and increase the value in the resolution plan after negotiations with the CoC, if an opportunity is given to the applicant herein.”
It also submitted that “at present, it has proposed to pay a revised sum of Rs 615 crore to CoC, which proposal has not been placed to the CoC at any instance. The Applicant submits that there is a legitimate and fair chance of there being proper revival with higher value of recovery for creditors if the Applicant herein is given an opportunity to present its plan to the CoC…”
It sought NCLT’s direction to the RP to treat the Dhanuka’s resolution plan as rejected and consequently, to place Accord’s plan before the CoC for its consideration.
Orchid Pharma, in a recent regulatory filing, said that while the resolution plan from Dhanuka Laboratories had received 67.07 per cent votes in favour, one of the CoC members – Punjab National Bank (International) Ltd – had sent an email asking that their e-vote be changed to dissenting. Once the change is considered, the voting for the resolution plan would fall to 65.53 per cent, while it is required that 66 per cent of the CoC members vote in favour of a plan for it to be approved.
The Resolution Professional, according to legal advice, decided to file Dhanuka’s plan with the NCLT and sought guidance with respect to accepting the change in stand by Punjab National Bank (International) Ltd and on the treatment of voting percentage.
It is against this decision that Accord has now moved the NCLT. In its earlier petition, Accord had sought directions to the Resolution Professional and the CoC to take its email on May, 2019, into consideration. The NCLT bench comprising BSV Prakash Kumar, member (Judicial) and S Vijayaraghavan, member (Technical) dismissed the application stating that the company had no rights to file an application until its plan was approved.
The highest bid by Dhanuka Laboratories this time has seen a larger haircut compared to the Rs 1,490 crore bid submitted by the previous successful bidder, Ingen Capital. The quote is less than Rs 1,000 crore this time and is below the liquidation value, said sources close to the process. However, NCLT annulled Ingen Capital’s resolution plan after approving it for implementation, as the investor allegedly failed to remit the upfront payment according to norms. Ingen Capital’s resolution plan was approved by the NCLT on September 17, 2018, and according to the approved resolution plan, Ingen was expected to deposit Rs 1,000 crore upfront to the financial creditors. Ingen, however, sought more information, which was not allowed by the resolution professional.
A consortium of 24 banks has lent a total of over Rs 3,200 crore to the drug maker.
In the second attempt, three pharmaceutical companies – Gurgaon-based Dhanuka Laboratories, Chennai-based Accord Life Spec and Hyderabad-based Covalent Laboratories – were in the fray. Dhanuka Laboratories is a prominent manufacturer and exporter of oral cephalosporin APIs. Covalent also specialises in manufacturing cephalosporin and its intermediates.