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TMI Blog2020 (6) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... of DRL, i.e. a Member, may discuss their issue and take a call on consolidating it with the Consolidated Resolution Plan. The fate of each of the 100% subsidiaries of LCL viz. WAML, DCCL, DRL and WPSL depends on the outcome of LCL's CIRP. Looking at the substantial inter-dependence, this Bench is of the view that without consolidation of LCL group companies no Resolution of Insolvency of LCL and its 100% subsidiaries is possible and would result into a loss of huge value to all stakeholders and thereby defeating the objective of the Code. Petition allowed. - MA 3664/2019 & CP (IB) NOS. 1765,1757 & 574/MB/2018 - - - Dated:- 26-2-2020 - Chandra Bhan Singh, Technical Member And Suchitra Kanuparthi, Judicial Member For the Petitioner : Pradeep Sancheti, Sr. Adv. Pulkit Sharma, Prateek Mishra and Rugved More For the Respondent : Deep Roy, Adv. Ameya Gokhale , Salonee Kulkarni and Kriti Kalyani ORDER CHANDRA BHAN SINGH, TECHNICAL MEMBER 1. This Application is preferred by Axis Bank Limited, L T Infrastructure Finance Company Limited, Central Bank of India, Allahabad Bank, Corporation Bank, Asset Reconstruction Company of India Ltd., Karnatak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises leased by it from LCL. To this end, a Lease Agreement dated 30-9-2010 was executed between LCL and DCCL. However, since the said Agreement was not duly stamped and registered, the same has been cancelled by the Resolution Professional of LCL. 8. The CIRP of LCL had commenced on 30-8-2018 and the Expression of Interest (EoI) was floated for the first time on Nov. 13, 2018 with multiple extension was provided for the submission of EoI on 07-12-2018, 18-12-2018, 08-1-2019, 17-1-2019, 25-2-2019, 11-4-2019, 25-4-2019 and 24-5-2019. After substantial effort only 3 (three) Resolution Applicants submitted their Resolution Plan for the Corporate Debtor. 9. In case of WAML, the CIRP had commenced on 17-12-2018 and the EoI was floated on 24-5-2019. However, despite substantial effort as on date the Applicant (LCL) has mentioned that no Resolution Plan has been received for WAML. 10. The CIRP of DCCL had commenced on 5-2-2019 and the EoI was floated on 26-5-2019, however, for DCCL also no Resolution Plan has been received. 11. The Resolution Professional of LCL mentions that the Resolution Applicants in their proposal to submit Resolution Plans of LCL had proposed that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any force after LCL's Resolution/Liquidation and thus leaving WPSL as an entity with no business or revenue stream. It would be interesting to note here that L T, the sole Financial Creditor of WPSL who is also the Financial Creditor of LCL has confirmed that it would prefer its financial debt in WPSL to be resolved as part of the Consolidated Resolution Plan for LCL. 15. Similarly, Dasve Retail Limited (DRL) is again a wholly owned subsidiary of LCL. DRL has only one Financial Creditor, i.e. Central Bank of India, which like DCCL is also among the Financial Creditors of LCL. The entire financial Debt of DRL has been admitted as with Financial Debt of LCL pursuant to the Corporate Guarantee and Security provided by LCL to the lenders of DRL. The sole business of DRL is operation of retail business for the properties belonging to LCL. It is clarified that such infrastructure is not owned by DRL but only by LCL. Like DCCL, WAML and WPSL, the revenue stream of DRL will cease to exist with the Insolvency of LCL. The sole Financial Creditor of DRL has confirmed to the Resolution Applicant that it would prefer the Resolution of its Debt as part of the consolidated Resolution Plan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of LCL that most of the Resolution Applicants have put Consolidation as a pre-condition to Resolution Plan. Therefore, it would be harder to find a Resolution Plan for any of these Companies on a stand-alone basis if the supply and demand from rest of the Companies is not guaranteed. However, if all the above-mentioned group Companies of LCL are resolved in a coordinated/consolidated manner, a much more value maximising Resolution could be achieved. 18.4 This case for consolidation of CIRP of various LCL Group Companies is akin to Insolvency Resolution of different Videocon Companies by way of Consolidation of separate proceedings by treating the Corporate Insolvency Resolution Process (CIRP) as one for all these Companies. In case of State Bank of India v. Videocon Industries Ltd. [CP(IB-02/2018), dated 8-8-2019], 13 yardsticks for looking into the rationality of consolidation was enumerated. We are inclined to test whether in case of LCL Group Companies those yardsticks/criteria are being met or not. Each of the yardstick/criterion and the manner in which it is being met in the case of Insolvency of LCL and its Group Companies are as under:- I. Common Control : WAM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in this respect have already been admitted by the Resolution Professional of LCL. VII. Pooling of Resources: LCL, WPSL, DCCL and DRL depend upon a common set of assets for functioning of their respective businesses. VIII. Co-existence for survival: WAML is 100% subsidiary of LCL and its business is solely to manage certain infrastructure of Lavasa at Lavasa Hill Township and therefore directly interlinked to that of LCL. DCCL's sole business is to operate the convention centre located in the Lavasa Hill Township built on land leased out by LCL. WPSL is a 100% subsidiary of LCL and its business is solely to develop, operate and maintain the power and infrastructure facility of the LCL at the Lavasa Hill Township. DRL is a 100% subsidiary of Lavasa and its business is operation and management of retail outlets in Lavasa Hill Township belonging to LCL. In view of the above, it is clear that the survival of the subsidiaries was dependent on LCL. IX. Intricate Link of Subsidiaries: Consolidated Accounts, Pooling of Resources, Common Assets, and Inter-dependent business functions are examples of intricate link amongst subsidiaries. X. Inter-twined Accounts: The Applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 23-9-2002 signed between Maharashtra Krishna Valley Development Corporation and Corporate Debtor (the Lessee) i.e. LCL it was decided as per clause 18 of the Deed of Lease that LCL does not have right to assign the Lease-hold rights to any other person. Therefore, the sub-Leave dated September 30, 2010 of the property, to DCCL (Deed of Sub-Lease) by the Corporate Debtor LCL without permission of the Lessor, i.e. Maharashtra Krishna Valley Development Corporation and by way of unregistered instrument without payment of adequate stamp duty is in contravention of applicable laws and therefore, vests no rights, interest, or title whatsoever in DCCL pursuant to Deed of Sub-Lease. Besides, as has been mentioned in the previous paragraphs the DCCL is 100% subsidiary of LCL and is part of Lavasa group and is not amenable to Resolution on a stand-alone basis. Therefore, this Bench is of the view that DCCL Resolution be consolidated and clubbed with the parent Company. 20. DRL is a wholly owned subsidiary of LCL. It has only one Financial Creditor, i.e. Central Bank of India. In case of DRL also the entire Financial Debt has been Admitted as Financial Debt of LCL pursuant to the Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iaries and have L T Infrastructure Finance Company Limited and Central Bank of India respectively as the sole Financial Creditors who have agreed to resolve its Debt as part of the Consolidated Resolution Plan of LCL. However, since Warasgaon Power Supply Limited and Dasve Retail Limited are not undergoing CIRP, therefore, the Consolidated CoC of LCL, WAML and DCCL may take an informed decision regarding the Resolution of Debt of Warasgaon Power Supply Limited (WPSL) and Dasve Retail Limited (DRL). III. As prayed by the Applicant and all the Financial Creditors of WAML, DRL and WPSL, the Resolution Professional of the parent Company i.e. of Lavasa Corporation Limited is appointed as the Resolution Professional for the Consolidated CIRP of the Corporate Debtor (LCL). IV. An initial time period of 60 days from the date of this Order is granted for the completion of the Consolidated CIRP of Lavasa Group. For any further extension, depending on the progress of the Consolidated CIRP, the CoC/Resolution Professional may approach the Adjudicating Authority accordingly. 24. MA 3664/2019 in CP 1765, 1757 and 574 of 2018 is Allowed as indicated above. - - TaxTMI - TMITax - In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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