In what is being seen as first ever in India’s bankruptcy laws history, an Appellate court has set aside a lender-approved resolution plan on the reasoning that the proposed upfront payment for the stressed asset, Indo-Malaysian joint venture United Seamless Tubular, was substantially lesser than the mean liquidation value.
NCLAT further said that the RP approved by the committee of creditors (“CoC”) also prejudices towards operational creditors and did not provide them the equal treatment as that to financial creditors. Hence, the court ordered the succesful bidder, Maharashtra Seamless, to raise its offer to Rs 597.5 crore from Rs 477 crore.
In the past, United Seamless and one other dissenting lender – Indian Bank had moved to NCLAT, for seeking orders against the resolution professional (RP). They alleged that the RP was colluding with the bidder of his preference and thereby was unduly favouring the bidder by undervaluing assets of United Seamless.
Kamineni group which is based out of Hyderabad owns 60% of United Seamless, with Malaysia’s UMW group, holding the rest in the joint venture. Its facility near the city manufactures seamless pipes that are used in the oil and gas and automotive industries.
The order of the NCLAT came while was responding to petitions filed by promoters of United Seamless and Indian Bank, challenging the NCLT order of January 21 that admmitted 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.