NEW DELHI: Amidst the growing outcry over the recent takeover of Videocon group of companies by Anil Agarwal’s Vedanta Ltd for a paltry sum of Rs 3,000 crore against the creditor’s claim of Rs 46,000 crore, the chairman of the insolvency regulator has said that such large haircuts under the insolvency law are not unusual in any other jurisdictions.
“The amount that is shown as due to creditors is nothing but an ‘imaginary’ amount,” said Insolvency and Bankruptcy Board of India (IBBI) chairman MS Sahoo. Two things are on the ground – one, is the available assets in the books of the corporate debtor, and the amount due in the books of creditors.
Often most of the amount due under IBC has already been written off by the lenders,” he added. Talking about the 39 per cent recovery rate under the Insolvency and Bankruptcy Code (IBC), he said the creditors in such cases are getting 180 per cent of the liquidation value. “If the company had gone into liquidation, the creditors would have gotten at best the liquidation value.
But if in case of a resolution, not only creditors are getting 180 per cent of the liquidation value but the company is also surviving,” he argued, citing examples of two cases where the creditors’ claimed amount was Rs 9,000 crore each but those companies existed only on paper. “There was not even a paisa left in those companies,” Sahoo noted.
On the issue of fixed deposit holders of housing finance company DHFL getting a short shrift as per the successful resolution plan of Piramal Group, where the fixed deposit holders are getting only 20-25 per cent of their dues, Sahoo said that the rule of the game (under IBC) is that one will have to go by the majority decision because there has to be a solution.
“You have to let go of the rights that existed before the case came under IBC. The main objective of the IBC is to save the company,” reiterated the IBBI chairman.
In the DHFL case, 74,500 fixed depositors with claims of Rs 5,400 crore had six per cent vote share in the committee of creditors, and they were the only ones who had opposed the Piramal bid.
Sahoo also clarified on the issue of misuse of the one-time-settlement provision under IBC, saying that any offer for settlement from the promoters has not been entertained. The law allows only the insolvency applicant to withdraw a case.