The National Company Law Appellate Tribunal has directed the Centre to take action against US-based investor Ingen Capital Group LLC, its managing director and other directors for not implementing a resolution plan for Chennai-based Orchid Pharma after its proposal was selected by the Committee of Creditors (CoC) and National Company Law Tribunal (NCLT) for implementation. The order comes on a plea filed by Ingen Capital against the Resolution Professional (RP) with the appellate tribunal.
An NCLAT bench comprising Justice S J Mukhopadhaya and Justice Bansi Lal Bhat directed the Centre through the Ministry of Corporate Affairs to take appropriate steps.
"If the appellant (Ingen Capital) has no office in India then the Central Government through Ministry of Corporate Affairs may take up the matter with USA, where the appellant company is situated," said the order. The appelate tribunal ordered Ingen Capital to be deposit Rs 10 lakh in favour of the CoC within 30 days. The bench observed that Ingen failed to deposit the amount at an earlier date.
The tribunal in an order on February 1, 2019 issued a show cause notice to Ingen Capital directors Umesh Bhatia and Harish Bhatia "as to why appropriate action be not taken against them and the NCLT, Central government and its agancies be not asked to take appropriate steps against the company and its directors and why cost not be imposed on them."
With the directors not submitting a proper reply, the NCLAT in an order dated March 1, 2019, sought the investor to file show cause reply within three weeks, failing which the Appellate Tribunal may initiate a contempt proceeding against them and may issue bailable warrant of arrest. The show cause notice to the directors asked them as to why appropriate action be not taken against them and the National Company Law Tribunal, the Central Government and its agencies be not asked to take appropriate steps against the company and its directors and why cost be not imposed on them. The Ministry of Corporate Affairs was also made a respondent to the appeal.
Ingen approached the NCLAT with an appeal assailing the order passed by the NCLT bench directing to deposit one third of the Rs 1,000 crore payable to secured creditors. The appellate tribunal directed it to deposit at least Rs 1,000 crore with the NCLT, Chennai, Registrar. However, Ingen's counsel said that without receiving certain documents and information it has been seeking, it will not be possible to deposit the amount. In its order on February 1, 2019, the NCLAT observed that the company does not want to give effect to the approved resolution plan and has put preconditions that weren't included in the resolution plan. Ingen had to pay the amount in 30 days and settle the banks by that time. A consortium of 24 banks has lent a total of over Rs 3,200 crore to the drug maker. With Ingen allegedly not paying the upfront money, NCLT has directed it to pay one third of the payment due to the financial creditors of the pharmaceutical company, which is around Rs 334 crore, in a fixed time-frame. It was at this point Ingen approached the NCLAT with its appeal.
Earlier, Ingen had alleged a difference between the assets they had been shown and the actual situation on the ground. The allegation was denied by the RP. For Ingen, this was its second unsuccessful bid for Orchid. The private equity investor’s earlier bid, which was lower than the liquidation value of Orchid, was almost thrown out by the CoC. Ingen later offered to pay Rs 100 crore more than the liquidation value and this was subsequently approved by the panel and by the NCLT.
Meanwhile, the NCLT nullified Ingen Capital's resolution plan and allowed 105 days to the RP and the CoC to submit a fresh expression of interest. The RP said that he has received e-mails from Divi's Laboratories Ltd, Gland Celsus Biochemicals Pvt Ltd and Fidelity Trading Corporation. Apart from this, he has also submitted that he has received oral enquiries from ART Capital (India) Pvt Ltd, Everstone Group, Aion Capital, Piramal Capital and Finquest Group expressing interest in proposing Resolution Plans.
The company, earlier this week, said that potential investors have sought the Resolution Professional to share the provisional financials of the company for 2018-19, before submission of a resolution plan. The last date for submission is Friday. The RP stated that the statutory audit for 2018-19 would not be completed before the due date for submission of resolution plans as the audit is for the full financial year. As Orchid Pharma is a listed entity and the details sought for are price sensitive, the RP informed CoC that the financial information requested would also be uploaded on the website of the company.
Ingen Capital sought to replace the RP with another expert, alleging that it was asking limited information from the RP to raise funds, but he was not providing the information. Ingen claims, consequently, it could not close the transaction as envisaged in the resolution plan. The NCLT junked the plea.