The National Company Law Tribunal (NCLT) has ordered the inclusion of Videocon’s oil businesses in Brazil and Indonesia as part of insolvency proceedings being conducted in India, according to two people aware of the matter. The order is the first instance of overseas incorporated subsidiaries being brought under the ambit of local insolvency laws.
The assets include stakes in overseas oil blocks held through Videocon arms incorporated in the Cayman Islands and British Virgin Islands. These were purchased after Videocon entered an agreement with state-run Bharat Petroleum Corporation Ltd. 14 years ago to search for foreign investment opportunities jointly. The two partners reportedly invested over $2 billion in development of the assets over the past six to eight years.
Lender State Bank of India had appointed Deloitte as advisor for sale of Videocon’s stake in the Indonesia and Brazil blocks in August last year. SBI opposed inclusion of the assets as part of local insolvency proceedings at NCLT.
Videocon, an Indian-incorporated entity argued that loans taken by overseas subsidiaries were guaranteed by it, making the parent company the ultimate beneficial owner of those assets. Videocon and its promoter Venugopal Dhoot also claimed at NCLT that this was reason enough for them to be included in the local proceedings.
“This is the first case in the Insolvency and Bankruptcy Code where NCLT has held that the subsidiaries’ properties, if acquired by parent company’s resources, should be included as part of the insolvency process,” said Sandeep Ladda, a lawyer representing the Videocon group.
SOURCE: The Economic Times, February 13, 2020