In a blow to beleaguered Orchid pharma, the National Company Law Appellate Tribunal (NCLAT) has set aside the Chennai NCLT order that approved the resolution plan of Dhanuka Laboratories on the ground that the amount offered in favour of stakeholders, including the financial creditors and the operational creditors, was much less than the liquidation value.
This was Orchid’s second resolution plan – the previous one by US-based Ingen Capital was annulled by the NCLT after the firm had failed to remit the upfront payment as per norms. In its November 13 order on an appeal filed by one of the resolution applicants, Accord Life Spec, the NCLAT Bench ordered setting aside of the approved resolution plan. The matter stands remitted to the adjudicating authority (Chennai NCLT) for decision in accordance with law, the NCLAT said.
The NCLAT observed that infusion of fund for maximisation of the assets of the corporate debtor (Orchid Pharma) cannot be counted for the purpose of the amount, which is being kept for distribution among stakeholders, including the financial creditors and operational creditors. If it is less than the liquidation value, such plan cannot be upheld, as that will be against the object of the IBC and Section 30(2) of the said code.
Accord Life Spec had alleged that the resolution plan by Dhanuka was neither viable nor feasible and was initially dissented by the members of the CoC, but subsequently they voted in favour. To this, the NCLAT Bench said as the plan was approved with voting share of 67%, it was not inclined to accept the submission.
The NCLAT in July had stayed the Chennai NCLT order approving Dhanuka Laboratories resolution plan and ordered issuance of notice to Orchid Pharma RP and Dhanuka Laboratories, while posting the matter to August 28 for admission.
The NCLT had approved the resolution plan by Dhanuka on June 25, rejecting a plea against it by Accord Life Spec which had cited inadequate mandatory vote share of the CoC. Accord Life Spec moved the NCLAT against this order.
According to the Dhanuka plan, creditors will get around Rs. 1,116 crore including Rs. 570 crore quoted by Dhanuka Lab. Orchid’s liquidation value was around Rs. 1,300 crore.
Source: Financial Express, November 15, 2019