2020 (2) TMI 1345 - Tri - Insolvency and Bankruptcy

Direction to consider and treat all assets, properties (tangible and intangible), rights, claims, benefits of the Respondent Nos. 2 to 5 as assets and properties of Videocon Industries Ltd. for the purpose of present CIRP and to include the assets, liabilities, claims of Respondent Nos. 2 to 5 in the Information Memorandum (IM) of the present Corporate Debtor, Videocon Industries Ltd - Declaration that moratorium as per the provisions of the Code is applicable and imposed on the said foreign oil and gas assets and all the other rights, assets (tangible and intangible) and benefits held by or through the Respondent Nos. 2 to 5. HELD THAT - In case the said assets are not considered to be assets of single economic entity and/ or of the Respondent No. 1/ VIL, then, by no stretch of imagination, the effective resolution of ongoing CIRP of any of the 13 Companies as well as the CIRP VOVL would meet to the objective envisaged under the IB Code and they shall be forced towards the liquidation despite having sufficient means and assets to resolve the debt of all corporate persons - there shall be compromise rather the rights and interest of important stakeholders like Operational Creditors, employees etc. shall be jeopardized to the greater extent as looking at the cross creation of the security interest in relation to the assets of each of the VIL Group Companies would not be able to independently meet with the claims lodged by all the creditors. As such, to effectively find resolution, and maximize the value of the assets, and keep the corporate persons as a going concern, the foreign Oil and Gas assets cannot be treated separately only for the benefit of the Financial Creditors. The foreign oil and gas assets and properties, including any claim, interest therein, of Videocon Group held through Respondent Nos.2 to 5 will have to be said to be the property of Respondent No. 1, the present Corporate Debtor/ VIL for the purpose of the present CIRP. The security interest is created by Rupee Facility Lenders in the oil and gas assets and there is cross creation of the security interest by all lenders in other business assets of Videocon Group treating it as single economic entity. Further, the foreign oil and gas assets of Videocon Group held through Respondent No. 2 to 5 is in fact, asset and property of Respondent No. 1/ VIL on the count of being original acquirer or alternatively even for qualifying all tests to lift corporate veil in between Respondent No. 1 / VIL and Respondent Nos. 2 to 5. Therefore, the assets held by them can be said to be its assets i.e. the assets of Respondent No. 1/ VIL/ Present Corporate Debtor, which is under the CIRP. Application allowed.

Summary

Issues Involved:
1. Whether the foreign oil and gas assets and properties, including any claim, interest therein, of Videocon Group held through Respondent Nos.2 to 5 can be said to be the property of Respondent No. 1, the present Corporate Debtor/ VIL for the purpose of the present CIRP.
2. Whether the provision of Section 14 of the Code would apply to the said foreign oil and gas assets and properties, including any claim, interest therein.
3. Whether the criteria for consolidation of CIRP as propounded in the Judgment of 08.08.2019 are met in this case.

Detailed Analysis:

Issue 1: Ownership of Foreign Oil and Gas Assets
The Tribunal examined the acquisition and financing documents related to the foreign oil and gas assets. It was established that the CHA business was funded through the RTL Agreement, while the foreign oil and gas business was funded through the LOC/SBLC Facility Agreement. Despite amendments, Respondent No. 1 (VIL) was never absolved from its original liability of repayment. The financial creditors lodged claims amounting to ?23,120.90 Crores in the ongoing CIRP of VIL plus 12 companies. The Tribunal noted that the acquisition documents such as the Share Sale Agreement and the Quotaholder Agreement still listed VIL as the purchaser, and there was no legal transfer of these rights to Respondent Nos. 2 to 5. The Tribunal concluded that the foreign oil and gas assets held through Respondent Nos. 2 to 5 were indeed the property of VIL for the purpose of the present CIRP.

Issue 2: Application of Section 14 of the Code
The Tribunal held that since the foreign oil and gas assets were considered the property of VIL, the provisions of Section 14 of the Insolvency and Bankruptcy Code, which pertains to the moratorium, would apply. This means that any action to foreclose, recover, or enforce any security interest created by the corporate debtor in respect of its property, including the foreign oil and gas assets, would be prohibited.

Issue 3: Criteria for Consolidation of CIRP
The Tribunal reviewed whether the criteria for consolidation as outlined in the Judgment of 08.08.2019 were met. The criteria included common control, common directors, common assets, common liabilities, inter-dependence, interlacing of finance, pooling of resources, co-existence for survival, intricate link of subsidiaries, intertwined accounts, inter-looping of debts, singleness of economics of units, and common financial creditors. The Tribunal found that all these criteria were satisfied in this case. The Tribunal emphasized that treating the foreign oil and gas assets separately would compromise the rights and interests of stakeholders and jeopardize the resolution process.

Conclusion:
The Tribunal concluded that the foreign oil and gas assets and properties, including any claim, interest therein, held through Respondent Nos. 2 to 5, are to be considered the property of VIL for the purpose of the present CIRP. Consequently, the provisions of Section 14 of the Insolvency and Bankruptcy Code would apply to these assets. The Tribunal allowed MA 2385/2019 to the extent of the relief sought, directing that these assets be included in the CIRP of VIL. The time spent in deciding the application was added to the permitted timeline for the completion of the ongoing CIRP.