Videocon Industries has moved the Bombay High Court against State Bank of India and the Reserve Bank of India and the Union government, appealing to the court to stay the lender’s move to send the company to the National Corporate Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code.
A division bench of the high court will hear Videocon’s petition on Wednesday. Videocon Industries was on the second list of 28 entities prepared by the RBI sent to the banks for action under the IBC 2016. The lenders then moved the NCLT early this month against these companies and appointed insolvency professionals on these companies. On the first list, the RBI had sent 12 companies to the NCLT for resolution of their debt.
Videocon had earlier made an offer to the lenders to sell its assets to pay its domestic debt pegged at Rs 20.9 billion, according to its 2017 annual report. The company said its overseas debt worth another Rs 220 billion was backed by global oil assets and was not part of the IBC process. With oil prices moving up, the company said it does not foresee any problem servicing its overseas loans.
The company was declared a non-performing asset by Dena Bank in early 2017, leading to a sharp fall in its share prices. Its share price is currently trading at Rs 18 a share.
This is not the first time a company is taking the RBI to the court. Essar Steel had moved the Gujarat High Court against the RBI after the banking regulator said the NCLT would have to hear the first 12 IBC cases on a “priority basis.” These words were later omitted by the RBI after the high court asked the regulator on what basis it was instructing the NCLT — a judicial body – to hear cases on priority. The Essar suit was later dismissed.
In the past two years, VIL sold its Kenstar brand to Everstone Capital to repay loans. The group had assured banks that it would sell its land bank to repay debt.
The company’s headquarters in Fort, Mumbai, was sold for Rs 300 crore last year and now houses Tata group’s temporary headquarters.
Bankers said the company had a legal right to challenge the RBI order. “The only downside is that it would set a precedent and might hit the pace of resolution of stressed assets,” said a bank official.business-standard