2019 (9) TMI 27 - Tri - Companies Law

Approval of sale of the shares of Specified Wind SPVs held by IWEL to ORIX, free and clear from all encumbrances, liens, security interest and third party claims upon receipt of the ORIX Revised Bid amount for ORIX, in compliance of the terms of the SPA - price discovery mechanism - penultimate lap - HELD THAT - The Resolution Framework is based on the principles underlying the Insolvency Bankruptcy Code, 2016 and is in line with the mandate of the New board ( In terms of the October 1 Order). Under the circumstances, it is in larger public interest and in the interests of justice that this Tribunal approves the sale of 51% of the shareholding of each Specified Wind SPVs to ORIX and passes necessary directions to facilitate/consummate the said resolution on the terms as contemplated under the SPA. It is submitted that the approval of the resolution process of the Specified Wind SPVs will enable the New Board to take steps to finalise a resolution plan/ plans for the overall resolution of the Applicant Group. It is pertinent to mention that after approval of GAIL's bid from the Creditors' committee of IWEL, in terms of the Second MOU, GAIL's bid was disclosed to ORIX vide intimation letter dated 18.4.2019 - Subsequently, ORIX, by way of its letter dated May 13, 2019, issued to IWEL and IEDCL, confirmed its intention to exercise its right under the Second MoU to acquire 51% of the share capital in each of the Specified Wind SPVs based on the highest bid price ( i.e. GAIL's bid amount of INR 1,064 Crores for 100% of the share capital of each of the specified Wind SPVs). The sale of shares is approved - application allowed.

Summary

Issues Involved:
1. Approval of the sale of shares of Specified Wind SPVs held by IWEL to ORIX.
2. Compliance with the terms of the SPA.
3. Resolution process for IL&FS Group's subsidiaries.
4. Execution of shareholders agreements and MOUs.
5. Public solicitation and bidding process.
6. Valuation and financial bids.
7. Approval from creditors and judicial authorities.
8. Implementation and consummation of the sale.

Issue-wise Detailed Analysis:

1. Approval of the sale of shares of Specified Wind SPVs held by IWEL to ORIX:
The application MA 2756/2019 was filed by Infrastructure Leasing and Financial Services Ltd. (IL&FS) seeking approval for the sale of shares of Specified Wind SPVs held by IWEL to ORIX, free from all encumbrances, upon receipt of the ORIX Revised Bid amount. This sale is part of the resolution process for seven subsidiaries of IL&FS, including Lalpur Wind Energy Pvt Ltd., Etesian Urja Ltd, Khandke Wind Energy Pvt Ltd, Ratedi Wind Power Pvt Ltd, Wind Urja India Pvt Ltd, Tadas Wind Energy Pvt Ltd, and Kaze Energy Ltd.

2. Compliance with the terms of the SPA:
The sale was to be conducted in compliance with the terms of the Share Purchase Agreement (SPA) dated 7.8.2019 entered into between IWEL and ORIX. The SPA outlined the procedural requirements and financial terms for the sale of shares.

3. Resolution process for IL&FS Group's subsidiaries:
The resolution process was guided by the initial resolution framework and its addendum, which aimed to achieve asset-level resolution through public solicitation and price discovery mechanisms. The process included inviting Expressions of Interest (EoI), conducting due diligence, and soliciting binding financial bids.

4. Execution of shareholders agreements and MOUs:
Shareholders agreements (SHAs) were executed in March 2016 and March 2018, governing the inter-se rights and obligations between shareholders. Additionally, MOUs were executed to explore exit strategies and modify the monetization process from a private bilateral process to a public one.

5. Public solicitation and bidding process:
A public advertisement for EoIs was issued, and eligible applicants were provided access to an Information Memorandum and a data room. The process aimed to maximize asset value and ensure transparency. GAIL (India) Limited emerged as the highest bidder with a bid of approximately INR 4,800 crores, assuming all debt and attributing a positive equity value to the shares.

6. Valuation and financial bids:
Two registered valuers, Rakesh Narula & Co. and Adroit Technical Services, were appointed to determine the fair market value (FMV) and liquidation value (LV) of each Specified Wind SPV. GAIL's bid matched the highest financial bid amount, categorizing the Specified Wind SPVs as Category I companies.

7. Approval from creditors and judicial authorities:
The Creditors' Committee of IWEL unanimously approved GAIL's bid, and the bid was disclosed to ORIX. ORIX exercised its right to match GAIL's bid and confirmed its intention to acquire the shares. The sale process was approved by Justice (Retd.) D.K. Jain, subject to conditions, and the proposal was placed before the National Company Law Tribunal (NCLT) for final approval.

8. Implementation and consummation of the sale:
The Tribunal approved the sale of shares held by IL&FS Wind Energy Ltd. in the Specified Wind SPVs to ORIX, directing the transfer of shares free from all encumbrances upon ORIX making the required payments as per the SPA. The Tribunal also granted liberty to IWEL and ORIX to implement the SPA terms and directed that the payments be credited into a designated escrow account, to be maintained as an interest-bearing fixed deposit, subject to further orders of the Tribunal.

Conclusion:
MA 2756/2019 was allowed, approving the sale of shares held by IL&FS Wind Energy Ltd. in the Specified Wind SPVs to ORIX, and directing the transfer of such shares free from all encumbrances upon ORIX making the required payments. The resolution process was conducted in compliance with the orders of the Hon'ble NCLAT and the directions of Justice (Retd.) D.K. Jain.