HC restraint on Everonn loan money

Next hearing on April 4; ICICI alleges Everonn and Varkey Group not sticking to restructuring deal but Everonn alleges banks failed to fulfill their obligations

The high court here has issued an order restraining seven entities, companies and individuals, from returning deposits or paying out any money to the Everonn Group and it's promoters till April 4.

This comes on a petition filed by ICICI Bank, in connection with a debt restructuring agreement between it, Everonn and the latter's promoter, Varkey Group.

An order issued by judge K K Sashidharan earlier this month was on a petition filed by ICICI against Everonn Education, Edifications India, Everonn Schools, Everonn Skilling India and Varkey Group, with others. It will be next heard on April 4.

An Everonn spokesperson said banks failed to fulfill their funding obligations under the debt restructuring agreement. And, denied various allegations by ICICI in its application, including that the promoters planned to divert Everonn's business to other Varkey Group companies and gradually shut down the former.

Everonn Education has been engaged in providing information technology infrastructure, education content and training across government and private schools, colleges and retail centres.

According to ICICI's application, it sanctioned a loan of Rs 200 crore to Edifications India, full subsidiary of Everonn Education, for infusion as equity in various subsidiaries for setting up schools and colleges. It disbursed Rs 136.6 crore in tranches during June-November 2011. During the second half of 2011, Varkey Group acquired controlling interest in Everonn Education and its subsidiaries.

Later, in 2013 and 2014, Edifications India and Everonn Education entered into a debt restructuring agreement (DRA) with ICICI, Axis Bank and State Bank of India. It formed a Trust and Retention Account and allegedly agreed to transfer and route their receivables only through this account. However, the bank alleged, the company later opened several accounts with other banks, routing their income through those accounts. In a joint lenders meeting on November 17, 2015, Everonn Group and Varkey Group informed the bank the debt restructuring agreements wouldn't suffice and the lenders were asked to make a bigger sacrifice. The bank also alleges it was informed later that the future plan was to completely divert all business, contracts of Everonn Group companies to other entities of Varkey Group in India and gradually shut down the Everonn firms.

The bank also alleged that the financial results of Everonn Education for the quarter ended December 2015, published on February 21, 2016, showed income had fallen from 22.5 crore for the period ending December 2014 to Rs 3 crore for the period ended December 2015. "Further, by falsely accusing the banks/lenders of not disbursing the additional financial facilities, it has been shown that there is complete diminution in value in investments, advances to subsidiaries, advances to supplier and thereby proposed a writeoff of Rs 411.1 crore," it alleged.

Everonn response

In response to a mail seeking the company's response on the order and the ICICI allegations, an Everonn spokesperson said Varkey Group (VG) entered the education sector in India in 2012 and ICICI Securities had acted for VG in acquiring a controlling stake in a listed company, Everonn Education. Following the acquisition, the company signed a DRA with its banks, including ICICI. The DRA envisaged disbursement of new funds into the company for the purpose of implementing a bank-approved business plan for setting up K-12 schools.

"There is failure on the part of the banks to fulfil its funding obligations under the DRA. The company has, with the knowledge of the banks, requested VG to step in and provide financial support in the interest of over 1200 children studying in these schools and over 200 teachers and staff. There is no intention to transfer anys business or assets to VG or any of its associates," said the spokesperson.

Adding: "The current allegations by the bank have arisen as a result of the third quarter results declared recently by the company, which have been a fallout of the company's inability to drive its proposed business plan due to the bank's failure to comply with its funding obligations under the DRA."