Tag: Venugopal Dhoot

Overseas assets of defaulters, guarantors may soon be within lenders’ reach, BFSI News, ET BFSI

Banking & Finance

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FILE PHOTO: An India Rupee note is seen in this illustration photo June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

Lenders may soon be able to lay their hands on overseas assets of defaulting firms and personal guarantors.

The government has proposed adopting a global model law that will enable lenders to apply the Insolvency and Bankruptcy Code to defaulters’ assets lying overseas. These will include the offshore personal assets of the promoter if they have issued a personal guarantee. The changes would also allow the execution of orders against defaulters by overseas courts that have adopted the model law.

The model law is provided by the UNCITRAL — a subsidiary body of the United Nations.

The government has invited public comments on the proposed modifications by December 15.

The model law lays down the basic framework for cooperation between domestic and foreign courts and domestic and foreign insolvency professionals.

Personal guarantors

In the case of a personal guarantor, their ‘habitual’ place of residence will be taken into account to decide the jurisdiction where the main bankruptcy proceedings will happen. Debt recovery tribunals and the National Company Law Tribunal (NCLT) benches and their appellate tribunals are platforms where overseas creditors could initiate or participate in proceedings against personal guarantors in India.

The introduction of a cross-border insolvency law in the IBC, that is in line with international best practices and suitable for the Indian context, may be beneficial to all stakeholders. Draft part Z, as recommended by the insolvency law committee, is under consideration for enactment,” the ministry said, while proposing the additional measures regarding personal guarantors.

The changes were proposed after the ILC, constituted under the corporate affairs ministry to review the implementation of the IBC, noted the lack of a framework for cross-border insolvency. The government has decided to put in place a comprehensive framework for this purpose based on UNCITRAL model law on cross-border insolvency, which could be made a part of the IBC by inserting a separate chapter for this purpose.

In January 2020, the government had constituted a crossborder insolvency rules/regulations committee to recommend subordinate legislation.

Banks have approached the National Company Law Tribunal for invoking personal guarantees of promoters of 17 defaulting companies.

The defaulting promoters include those of Punj Lloyd, Amtek Auto, ABG Shipyard, Videocon, Varun Shipping, and Lanco, according to reports.

Armed with a Supreme Court order, banks are looking to invoke personal guarantees of tycoons from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of bank led by State Bank of India.

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.



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Personal insolvency proceedings start against Venugopal Dhoot; more promoters in line for action, BFSI News, ET BFSI

Banking & Finance

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Videocon chairman Venugopal Dhoot is already under CBI investigation on charges of causing a wrongful loss to a consortium of Indian PSU banks led by SBI.

After ordering the freezing of assets of Videocon promoter Venugopal Dhoot and other officials, the National Company Law Tribunal (NCLT) has admitted a personal insolvency petition against Dhoot.

Earlier the Ministry of Corporate Affairs (MCA) received permission to freeze Dhoot’s assets.

Asish Narayan has been appointed as the resolution professional (RP) in the case by a division bench led by judicial member Suchitra Kanuparthi and a technical member Chandra Bhan Singh. The next date of hearing is 20 September.

Lenders to Videocon had filed the personal insolvency petition to attach Dhoot’s assets a year ago and its admission now means the recovery process will go on full steam. But it is unclear how the admission of personal insolvency proceedings will impact the NCLT’s order freezing Dhoot’s assets on the MCA plea.

State Bank of India (SBI) the lead lender in the consortium of bank creditors to has also taken Venugopal’s brothers and Videocon co-promoters Rajkumar Dhoot and Pradipkumar Dhoot under the personal bankruptcy law.

Rs 18,000 crore debt

Banks led by SBI are seeking to recover close to Rs 18,000 crore by initiating guarantees given by the Dhoot brothers at different points in time to access loans from banks. Claims from Venugopal Dhoot come to about Rs 6100 crore while two separate petitions have also been filed by SBI has to invoke Rs 6,158 crore of personal guarantee given by Pradipkumar Dhoot and Rs 5353 crore to be recovered from Rajkumar Dhoot which are yet to receive the NCLT go ahead.

These guarantees were given by them for a mix of term and working capital loans granted to the company over the years.

Cyril Amarchand Mangaldas is representing SBI in the case.

The way ahead

Now that NCLT has okayed the recovery process the RP will examine the application and submit his report stating the reasons for approval or rejection of the application within 10 days.

This process is different from the corporate insolvency process and the NCLT will determine going ahead with the personal insolvency based on the report of the RP.

In December over 94% of the creditors by value voted for Vendanta arm Twin Star Technologies as the preferred bidder to take over Videocon. Vedanta’s offer of a little over Rs 3,000 crore was a haircut of more than 95% on admitted claims of Rs 61,770 crore.

Other defaulting promoters

Banks have approached the National Company Law Tribunal for invoking personal guarantees of promoters of 17 defaulting companies.

The defaulting promoters include those of Punj Lloyd, Amtek Auto, ABG Shipyard, Videocon, Varun Shipping, and Lanco, according to reports.

Armed with a Supreme Court order, banks are looking to invoke personal guarantees of tycoons from Venugopal Dhoot to Kapil Wadhawan to recover unpaid loans from their delinquent firms

The guaranteed debt

According to an estimate, the top 10 personal guarantors have guaranteed debt of over Rs 1.6 lakh crore. Among the big names, former promoters of Bhushan Steel and Power Sanjay Singhal and his wife Aarti Singhal had furnished personal guarantees worth up to Rs 24,550 crore to take loans from a consortium of banks led by SBI.

The former promoter of Reliance Communications, Anil Ambani, has also given a personal guarantee against the loan taken. Erstwhile promoter Wadhawan stands guarantee to loans taken by DHFL, which is sitting on debt of about Rs 90,000 crore, while Dhoot has also given a personal guarantee to a portion of Rs 22,000 crore loan to Videocon.



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Videocon’s Venugopal Dhoot moves NCLAT; says Twin Star Technologies’ offer too low

Banking & Finance

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Videocon group’s former promoter Venugopal Dhoot has moved the National Company Law Appellate Tribunal (NCLAT) against the decision of the lenders to accept the debt resolution proposal from a Vedanta group entity. Dhoot has claimed that the offer made by Twin Star Technologies was too low.

Banks will take a ₹42,000-crore haircut after the Mumbai Bench of the National Company Law Tribunal (NCLT) approved a bid by Anil Agarwal-backed Twin Star Technologies to acquire Videocon Industries for ₹2,962 crore. Claims worth ₹46,000 crore had been admitted under the insolvency process that began in December 2017.

NCLT expresses surprise

The NCLT, while approving the debt resolution plan, had expressed surprise that the bid placed by the Vedanta Group for acquiring 13 companies under the Videocon Group was almost the same value arrived at by the registered valuers for liquidation.

According to the valuation reports, the fair value of the Videocon group was ₹4,069.95 crore while the liquidation value was ₹2,568.13 crore. Twin Star Technologies has offered ₹2,962.02 crore to acquire Videocon

Dhoot had earlier promised to repay about ₹30,000 crore for taking back control of the conglomerate under Section 12 A of the Insolvency and Bankruptcy Code, which allows the withdrawal of the debt resolution proceedings under NCLT if the majority of the lenders agree to it.

But the offer by the Dhoot family entailed repayments until 2035, which was not acceptable to many banks on Videocon’s Committee of Creditors (CoC).

Promoters’ attempts

Dhoot’s fresh attempt to block the sale of Videocon assets comes at a time when several other promoters are also trying to do the same. For example, Kapil Wadhawan has also approached the Supreme Court claiming rights to bid for DHFL.

C Sivasankaran has also offered to take back control of Siva Industries by paying less than 7 per cent of the total outstanding debt.

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RBI raises loan limit to Directors on bank boards to Rs 5 cr, BFSI News, ET BFSI

Banking & Finance

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Mumbai, The Reserve Bank of India (RBI) has raised the limit of loan that can be given by banks to a Director on the board of a bank to Rs 5 crore from the previous cap of Rs 25 lakh.

In a circular issued on Friday, the central bank said that unless sanctioned by the Board of Directors or the Management Committee, banks should not grant loans and advances aggregating Rs 5 crore and above to any relative other than spouse and minor or dependent children of their own Chairmen and Managing Directors or other Directors. Same would be the rule in terms of relatives of Chairman or Managing Director or other directors of other banks.

Further, any credit facility given to the Directors and relatives of Directors have to be sanctioned by the appropriate authority in the financing bank, and the matter has to be reported to the board, it said.

Board approval would be required for loans given to major shareholders of the bank, or his relatives, where the shareholder holds more than 10 per cent in the bank.

There have been instances in the past wherein existing Directors allegedly misused their position to grant loans to favour their family members, as in the case of the former ICICI bank MD & CEO Chanda Kochhar who is alleged to have misused her official post to grant a massive Rs 3,250 crore loan to Videocon.

Allegedly, the loan was part of a quid pro quo arrangement under which Venugopal Dhoot invested Rs 64 crore in Chanda Kochhar’s husband’s NuPower Renewables.



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Lenders say they will get 26% of their dues, BFSI News, ET BFSI

Banking & Finance

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The lenders to Siva Industries have told the National Company Law Tribunal that they will get 26% of their dues after taking into account third-party guarantors. Operational creditors will get part of their dues under the settlement plan, according to a report.

The deal has raised eyebrows as such offers by promoters were rejected in the past.

The NCLT, Chennai, has to explain the rationale behind the one-time settlement (OTS) offer made by Siva Industries under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016. The lenders have also been asked to give the timeline of cash flow to all the creditors.

Until the last payment is made to the lenders within the deadline of 180 days set in the OTS application, the liabilities of the company will not be extinguished, according to the report.

On the reason why they approved the 12A petition of promoters banks told the court that if a company is liquidated or in a resolution plan involving a third party, all operational creditors, including tax authorities, are wiped out

Also, the IDBI Bank‘s claim of Rs 644 crore will be paid while Blackstone-backed International ARC will get an additional amount of Rs 510 crore via land sale, according to the report.

The settlement

Lenders of Siva Industries and Holdings have approved a one-time settlement proposal from the promoter under which they will take a 93.% haircut and just Rs 5 crore upfront cash.

Of the company’s total dues of Rs 4,863 crore, the IDBI Bank-led lenders will get Rs 313 crore, excluding upfront payment, within 180 day of receiving NCLT nod.

They will recover Rs 318 crore, with Rs 5 crore as upfront cash, out of the company’s total dues of Rs 4,863 crore. This amounts to a haircut of 93.5 per cent.

The holding company owes financial and other creditors about Rs 5,000 crore. Tata Sons had filed a claim of Rs 863 crore against the Sivasankaran group company but that was rejected by the latter’s interim resolution professional.

The creditors received an offer from Mauritius-based Royal Partner for the company but that was rejected on the grounds that the investor had been unable to demonstrate its seriousness in completing the deal.

Unusual deal

Bankruptcy experts have termed the development unusual, citing the rejection of such offers by promoters in the past.

The acceptance of Sivasankaran’s offer differs from the usual pattern of rejection by creditors of such deals proposed by promoters seeking to withdraw their companies from bankruptcy proceedings.

Atul Punj of Punj Lloyd, Videocon’s Venugopal Dhoot, Sanjay Singal of Bhushan Power and Steel, and the Ruias of Essar Steel had all made offers to creditors to persuade them to drop bankruptcy proceedings. All were rejected.

In DHFL’s case, the promoter Kapil Wadhawan had offered to repay the debt in full, but the lenders ruled in favour of Piramal.

Experts say while banks may be getting the most out of such settlement in absence of any serious bid, but such a move weakens the IBC, especially Section 29A that bars promoters from bidding for their assets in a bankruptcy court. The Siva deal, if it goes through, could set a precedent of promoters striking settlement deals with banks when there are no bidders.



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