Vedanta’s plans to buy Videocon assets set to hit litigation hurdle

NCLT admits personal insolvency plea against Videocon promoter

The lenders of Videocon Industries (VIL), consisting of public sector banks (PSBS), are staring at huge losses after the National Company Law Tribunal (NCLT), Mumbai bench, ordered attachment of the former promoters, the Dhoot family’s, and top officials’ assets.

Meanwhile, the NCLT has admitted a personal insolvency petition against Videocon promoter Venugopal Dhoot on Wednesday. The petition was filed by Indian banks a year ago.

Bankers say the Vedanta group’s plans to buy Videocon’s India assets may get derailed due to fresh litigation around the company.

The lenders had claimed ~62,000 crore from Videocon Industries, including its oil and gas subsidiary. Of this, the lenders had agreed to sell VIL’S domestic assets to Twin Star Holding, a holding company of Vedanta group, for ~3,000 crore. The lenders had also sought bids for the company's overseas oil and gas assets separately with an expected valuation of ~15,000 crore.

The bankruptcy process will go on but it will get delayed as the matter is pending before the National Company Law Appellate Tribunal (NCLAT). In its order, the NCLT said it is surprised with the manner in which financial institutions have come forward to grant loans to a sinking ship and again file a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC).

“This certainly raises eyebrows of the common man in the public,” it said while ordering to attach promoters and key management officials’ assets. The NCLT order is likely to be appealed at the NCLAT by the former promoters, said a source.

Indian lenders are currently saddled with several bankruptcy cases, which have not seen light of the day due to a flurry of litigation, including from other lenders like IFCI. Apart from VIL, the bankruptcy process of Reliance Communications, Lavasa Corporation and Jet Airways are also hanging fire.

Public sector bankers said lenders have made all required provisions for Videocon group’s exposures but the cost of provisioning is higher than the capital. The legal complications in Videocon’s case postpones the resolution. Collectively, banks’ provision bill runs into thousands of crores and continues to be locked in without resolution. These amounts, if released, would be useful for absorbing additional burden from accounts facing stress due to the second wave of Covid, they added.

VIL was referred to the NCLT in January 2018 for defaulting on loans worth ~62,000 crore. The loans included corporate guarantees given by VIL, the flagship company, under the obligor-coobligor structure for the oil and gas business, to the tune of ~20,000 crore.