2020 (6) TMI 455 - Tri - Insolvency and Bankruptcy

Tribunal orders consolidation of CIRP for Lavasa Corp. and subsidiaries; debts resolution for WPSL & DRL included.

In Re : Axis Bank Ltd.

The Tribunal ordered the consolidation of the Corporate Insolvency Resolution Process (CIRP) for Lavasa Corporation Limited (LCL) and its subsidiaries, ... Consolidation of respective insolvencies of LCL and two of its wholly-owned subsidiaries, WAML and Dasve Convention Centre (DCCL) - Resolution of the Debt of Warasgaon Power Supply Limited (WPSL) and Dasve Retail Limited (DRL) - HELD THAT:- DRL is a wholly owned subsidiary of LCL. It has only one Financial Creditor, i.e. Central Bank of India. In case of DRL also the entire Financial Debt has been Admitted as Financial Debt of LCL pursuant to the Corporate Guarantee and Security provided by LCL. The lone Financial Creditor, i.e. Central Bank of India, as an Applicant in the consolidation Application has mentioned that the financial Debt of DRL be resolved as part of the consolidated Resolution Plan for LCL. Keeping in view that DRL is a 100% subsidiary of LCL the infrastructure is not owned by DRL but by LCL and also revenue stream of DRL will cease to exist once LCL Resolution comes into effect, therefore, it is a fit case for where the Resolution of DRL be linked and decided with LCL. However, since DRL is not under CIRP 'Consolidated' CoC of LCL, WAML and DCCL where the sole Creditor of DRL, i.e. a Member, may discuss their issue and take a call on consolidating it with the Consolidated Resolution Plan. The fate of each of the 100% subsidiaries of LCL viz. WAML, DCCL, DRL and WPSL depends on the outcome of LCL's CIRP. Looking at the substantial inter-dependence, this Bench is of the view that without consolidation of LCL group companies no Resolution of Insolvency of LCL and its 100% subsidiaries is possible and would result into a loss of huge value to all stakeholders and thereby defeating the objective of the Code. Petition allowed. Issues Involved:1. Consolidation of Corporate Insolvency Resolution Process (CIRP) for Lavasa Corporation Limited (LCL) and its subsidiaries.2. Reconciliation of the List of Creditors for LCL, WAML, and DCCL.3. Submission and approval of a consolidated resolution plan.4. Resolution of the Debt of Warasgaon Power Supply Limited (WPSL) and Dasve Retail Limited (DRL).Detailed Analysis:1. Consolidation of CIRP for LCL and its SubsidiariesThe application was filed by financial creditors seeking the consolidation of the insolvencies of LCL and its wholly-owned subsidiaries WAML and DCCL, along with the resolution of debts of WPSL and DRL. The Tribunal noted that LCL and its subsidiaries are interlinked and their businesses are interdependent. The Tribunal emphasized that any stand-alone resolution would defeat the objective of maximizing the value of the corporate debtor, as the subsidiaries' operations and revenue streams are intrinsically tied to LCL.The Tribunal compared this case to the consolidation of the Videocon Group's insolvency proceedings, referencing the State Bank of India v. Videocon Industries Ltd. case, which enumerated 13 yardsticks for consolidation. The Tribunal found that LCL and its subsidiaries met these criteria, including common control, common directors, common assets, common liabilities, inter-dependence, inter-lacing of finance, pooling of resources, co-existence for survival, intricate link of subsidiaries, inter-twined accounts, inter-looping of debts, singleness of economic units, and common financial creditors.2. Reconciliation of the List of CreditorsThe Tribunal directed the reconciliation of the List of Creditors for LCL, WAML, and DCCL by the respective Resolution Professionals. This step was necessary to ensure accuracy and transparency in the consolidated resolution process.3. Submission and Approval of a Consolidated Resolution PlanThe Tribunal ordered the submission and approval of one consolidated resolution plan for LCL, WAML, and DCCL. It acknowledged that the resolution applicants had proposed consolidation as a pre-condition for their resolution plans, indicating that a coordinated approach would maximize value.4. Resolution of the Debt of WPSL and DRLThe Tribunal noted that WPSL and DRL, although not undergoing CIRP, are wholly-owned subsidiaries of LCL with their financial debts guaranteed by LCL. The sole financial creditors of WPSL (L&T Infrastructure Finance Company Limited) and DRL (Central Bank of India) preferred their debts to be resolved as part of the consolidated resolution plan for LCL. The Tribunal allowed this, stating that the consolidated Committee of Creditors (CoC) of LCL, WAML, and DCCL should take an informed decision regarding the resolution of debts of WPSL and DRL.Findings and Orders:1. Consolidation of CIRP: The Tribunal ordered a consolidated CIRP for LCL and its 100% subsidiary companies WAML and DCCL, all of which are undergoing CIRP.2. Resolution of Debts for WPSL and DRL: The Tribunal allowed the resolution of debts for WPSL and DRL as part of the consolidated resolution plan, subject to the decision of the consolidated CoC.3. Appointment of Resolution Professional: The Tribunal appointed the Resolution Professional of LCL as the Resolution Professional for the consolidated CIRP.4. Time Period: An initial period of 60 days from the date of the order was granted for the completion of the consolidated CIRP, with provisions for further extensions if necessary.The application MA 3664/2019 in CP 1765, 1757, and 574 of 2018 was 'Allowed' as indicated above.