2024 (9) TMI 1553 - AT - IBC

Seeking grant a relief as part of the IL FS Resolution Framework for resolution of Category II Companies by permitting writing down of the entire share capital of such Category II Companies upon payment of the bid value/proceeds without the requirement of obtaining any further approvals from the shareholders of such Category II Companies, resulting in the final resolution of the said entities - HELD THAT - From the facts and sequences of the events, it is clear that for the resolution of IECCL, steps were taken by the IL FS from January 2021 for issuing an invitation for Expression of Interest dated 13.01.2021. The invitation for Expression of Interest clearly mentions that Expression of Interest are invited for acquisition of 42.25% of the issued, subscribed and paid up share capital of IECCL held by IL FS and IFIN. The process in pursuance of the above invitation for expression is proceeding as on date. The ICICI Bank being lead lender of the IECCL has also participating in the process including the meetings of the CoC of the IECCL held from time to time. The submission of the IL FS is that the process of IECCL has gone too far and which is going for last three years be allowed to be completed and voting which has already been commenced and last date of which voting is 30.09.2024. The instance of ICICI Bank is not interdicted. Where the revised bid submitted by Howen International Fund SPC requires consideration is not for this Tribunal to assess and it is for the CoC to take a call. Letter sent by Howen International Fund SPC dated 07.07.2024 has extended its validity of fresh EMD till 31.09.2024. In event, the process of sale of 42.25% shareholding of IECCL is on-going resolution process is completed, the said shall not preclude the lenders including the ICICI Bank to raise objection on extinguishment of its entire debt. Liberty granted to the ICICI Bank to raise its objection on extinguishment of its entire debt for mere payment for 42.25% shareholding of IECCL. List IA No.5036 of 2023 on 14.10.2024 for hearing and all the objections on the application including the objection filed by the ICICI Bank - It is clarified that the resolution of IECCL which commenced from 13.01.2021 need to be completed irrespective of pendency of IA No.5036 of 2023 and it is clarified that the prayers made in IA No.5036 of 2023, IECCL shall be treated to be excluded.

Issues Involved:
1. Resolution of IL&FS Engineering and Construction Company Limited (IECCL).
2. Categorization and resolution framework for IL&FS Group companies.
3. Validity and objections related to the H1 bid by Howen International Fund SPC.
4. Application of IA No.5036 of 2023 regarding 100% write down of shares for Category II Companies.
5. Objections raised by ICICI Bank and other stakeholders.

Detailed Analysis:

1. Resolution of IL&FS Engineering and Construction Company Limited (IECCL):
The resolution process for IECCL, a Category II Company under the IL&FS Group, began with an invitation for Expression of Interest (EoI) on 13.01.2021 for the sale of 42.25% of its share capital held by IL&FS and IFIN. The process included a Swiss Challenge Process, where Howen International Fund SPC emerged as the H1 bidder. The revised financial proposal by Howen International Fund SPC was placed before the Committee of Creditors (CoC) for approval, and the voting process was ongoing.

2. Categorization and Resolution Framework for IL&FS Group Companies:
The National Company Law Appellate Tribunal (NCLAT) had earlier approved a resolution framework for IL&FS and its group companies, categorizing them into Category I and Category II based on the financial bids received. Category II Companies are those where the financial bid amount offered by the bidder is less than all the liabilities of the sale company.

3. Validity and Objections Related to the H1 Bid by Howen International Fund SPC:
Howen International Fund SPC submitted a binding bid for 42.25% of IECCL's share capital, which was later revised to Rs.799.19 Crores. ICICI Bank, a lead lender, raised objections stating that the bid value was lower than the liquidation value. Despite these objections, the CoC continued to consider the revised bid, and the voting process was in progress.

4. Application of IA No.5036 of 2023 Regarding 100% Write Down of Shares for Category II Companies:
IA No.5036 of 2023 sought permission to write down 100% of the share capital of Category II Companies upon payment of the bid value. However, IL&FS filed an affidavit stating that the resolution process for IECCL, which began in 2021, should be excluded from this application as it was at an advanced stage and involved only the sale of 42.25% shares.

5. Objections Raised by ICICI Bank and Other Stakeholders:
ICICI Bank argued that the sale of 42.25% shares could not be considered a resolution of the entire debt exposure of Rs.13,053.9 Crores. They requested that IECCL be included in the scope of IA No.5036 of 2023. Other stakeholders also filed objections to the 100% write down of shares. The Tribunal acknowledged these objections and granted liberty to ICICI Bank to raise its concerns about the extinguishment of its entire debt in the ongoing resolution process.

Orders:
1. The Tribunal listed IA No.5036 of 2023 for hearing on 14.10.2024, including objections from ICICI Bank and other stakeholders.
2. It clarified that the resolution of IECCL, which commenced on 13.01.2021, should proceed irrespective of the pending IA No.5036 of 2023, and IECCL should be excluded from the prayers made in IA No.5036 of 2023.
3. ICICI Bank and its consortium were granted the liberty to press for their objections regarding the extinguishment of their entire debt for the mere payment of 42.25% shareholding of IECCL in the ongoing resolution process.
4. IA No.3587 of 2024 and IA No.6326 of 2024 were disposed of accordingly.

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