NCLAT acts on Sebi plea, stays NCLT's Assam Company takeover order

Market regulator says firm is a shell company whose delisting under the RP will make process of forensic audit more difficult

Acting upon a petition filed by the Securities Exchange Board of India (Sebi), the National Company Law Appellate Tribunal (NCLAT), has stayed till the next hearing, BRS Ventures’ Rs 12.14 billion resolution plan for taking over of Assam Company. The proposal had earlier been approved by the Guwahati bench of the National Company Law Tribunal NCLT.

Sebi has contended that NCLT’s approval of the plan, which will delist the shares of Assam Company, is “directly in conflict with the jurisdiction and the interim directions passed by Sebi”. It has alleged that the Assam Company is a “shell company” and an independent forensic auditor is currently conducting an investigation under Sebi’s directives, to verify financial irregularities and misuse of funds by the company.

Before the approval of Abu Dhabi-based BRS Ventures’ plan by the Tribunal, the Assam Company was owned by Aditya Kumar Jajodia.

Sources suggested that implementation of the resolution plan, which requires delisting of Assam Company’s shares from the bourses, will alter the current shareholding structure of the company and may create hurdles in the investigation to track fund movement in and out of the company.

As on September 30 this year, the stake held by the promoter group (including Jajodia and Assam Oil Company) stood at 41.27 per cent while 58.73 per cent was owned by the public.

At the time insolvency proceedings commenced against Assam Company, Sebi wasn’t a party to the process. Sources said bidders for this firm knew of Sebi’s inquiries and orders against Assam Company but Sebi itself wasn’t party to the process as it didn’t have any financial stake.

A source involved closely with the resolution process claimed that the Guwahati High Court had already indicated that Assam Company isn’t a shell firm and this argument can be put forward in the next hearing of the case by NCLAT.

BRS Ventures, whose resolution plan was approved by the Committee of Creditors on August 10, and subsequently approved by NCLT on September 20, has already furnished a Rs 8.34 billion bank guarantee. The residual amount will be paid to the lenders by the end of December this year. However, an upfront cash payment of Rs 6 billion needs to be made to financial creditors under the resolution plan which can be invoked by the banks from the bank guarantee itself.

Under the approved plan, which is 3.5 times the liquidation value of Assam Company, secured lenders such as SBI, IOB, BoB and others are getting 80 per cent of their total dues while operational creditors, including the company’s employees are to receive 100 per cent of their total dues. 

Assam Company has a total debt size amounting to Rs 15.26 billion.

Assam Company's resolution process was marred by allegations of favouritism, issues of eligibility under Section 29(A) of the IBC and compliance issues, with MK Shah Exports and James Warren Company taking their allegations to the NCLAT and Dhunseri Petrochem closely monitoring the developments to quote its best bid.

Although around 14 potential bidders initially picked up the expression of interest, only four bids were finally submitted. These bidders were Dhunseri Petrochem, James Warren Tea, Surakhsa Asset Reconstruction and BRS Ventures. However, BRS Ventures had outbid the others by over three times.