Court Directs Attachment Of Properties Of Dhoot Family, Directors Of 8 Videocon Group Firms
Attachment is essential to protect public interest & public estate which is intertwined with estate of Respondents, noted NCLT.
In a strongly worded order, the Mumbai bench of the National Company Law Tribunal has directed interim attachment of all movable and immovable properties of promoters, directors, and other key management personnel of eight Videocon Group companies.
The directions have been passed against over 30 individuals, including five members of the Dhoot family—Venugopal Dhoot, his wife Rama Dhoot, their son Anirudha Dhoot, Kesharbai Dhoot, Pradipkumar Dhoot.
The interim order came in petitions filed by the Ministry of Corporate Affairs alleging oppression and mismanagement at:
Videocon Industries Ltd.
Sky Appliances Ltd.
Value Industries Ltd.
Evans Fraser And Co. (India) Ltd.
CE India Ltd.
Century Appliances Ltd.
Videocon Telecommunication Ltd.
Millennium Appliances India Ltd.
"If at all an interim order as sought by the Union of India is not passed, the devastating effect would be that the wrong doers, fraudulent persons would get away and the valuable assets of the companies would get depleted, bringing the irreparable loss to the stakeholders." - NCLT Mumbai
Other than attachment of properties, the bench also gave the following directions on Tuesday:
Disclosure of all movable and immovable assets owned by the individuals in India or worldwide on affidavit.
Indian Banks Association to facilitate disclosure of the bank accounts, lockers owned by the individuals, which will be frozen with immediate effect.
Depositories to freeze securities owned/ held by these individuals in any company/society and prohibition on alienation.
Income tax department to disclose information about all assets of these individuals in their knowledge or possession, for the purpose of freezing and restrain on alienation.
The directions apply not to the eight companies but to their promoters, directors, and other individuals who held key management positions.
The eight companies are a part of the 13 group companies which underwent a consolidated insolvency process culminating in approval of a resolution plan submitted by Twin Star Technologies earlier this year.
The plan saw the creditors taking a haircut of over 90% which drew severe criticism of the bankruptcy court. In approving the plan, the tribunal had expressed surprise at the value accepted by the committee of creditors.
Post which, dissenting creditors Bank of India and IFCI Ltd. had challenged the approval of the resolution plan before the appellate tribunal. On July 19, the NCLAT had stayed the approval of the resolution plan and granted "status quo ante".
This prompted Twin Star Technologies to move the Supreme Court which refused to intervene in the matter and sent the matter back to the NCLAT. The appellate tribunal is likely to take up the matter on Sept. 7.
During the hearing, counsel for one of the respondents Senior Advocate Krishnendu Dutta informed the bench that in light of NCLAT's stay order, moratorium under Section 14 of the IBC Act, 2016 is still in place. No new proceedings can then be instituted against these companies. Therefore, the present petition is not maintainable.
The bench however didn't find merit in this submission. It held that these are not proceedings against the companies but for the companies.
"The cover under moratorium and the same could not be instituted or proceeded with. This is not a proceeding against the Corporate Debtor but for the Corporate Debtor." - NCLT Mumbai
The tribunal pointed to the government's submission that no relief is being sought by the central government against the companies who are under insolvency. But the effort is to secure or restore the assets back to the ultimate victims of fraud, it noted.
The efforts will continue until the wrong doers are punished and the legitimate persons and their assets are restored back.NCLT Mumbai
State Bank of India, which had initiated insolvency against 13 Videocon Group entities, supports the government's petition, the bank's counsel Bishwajit Dubey informed the court.
To this, the tribunal said it's surprised with the manner in which the financial institution granted loans to a sinking ship, and then came forward to file an insolvency petition and is now supporting the ministry's petition. "This certainly raises the eyebrows of the common man in the public."
Mismanagement Allegations
The ministry's allegations are based on a transaction audit which was conducted between June 2016 and June 2018. The auditor was tasked to identify any preferential, undervalued, extortionate and fraudulent transactions that may have taken place in these companies.
The audit report concluded several serious acts of mismanagement on the part of erstwhile management and promoters.
For instance, in FY 2017-18, Rs 634 crore was written off from the sundry debtor account of Videocon Industries Ltd. On enquiry, the management gave the auditor a list of 967 customers against whom this amount stood receivable, which was later written off without any reasonable grounds.
7 out of the 967 customers were disclosed under “promoter/promoter group entity” during the Review Period. However, the said entities were never disclosed as a subsidiary, joint venture or an associate company of the Respondent.NCLT Order
Similarly, advances to the tune of Rs1,413 was written off the books of Videocon Industries Ltd. after the appointment of the resolution professional. No permission from the board of directors or lenders was taken for this adjustment. 'There have been thorough leakages which have got a recurring effect until this day,' the tribunal noted.
The NCLT will take up the matter next on Sept 22.