27 July 2019: The National Company Law Appellate Tribunal (NCLAT) has stayed the sale of Orchid Pharma to Dhanuka Laboratories, in the eleventh hour, as the scheme for acquisition was to become operational from Saturday.
In response to a petition filed by Accord Life Spec Private Ltd, a company promoted by DMK MP Jagatrakshagan’s family members, the NCLAT stayed the bids. It also ordered that SBI be impleaded in the case as one of the respondents. Accord along with Covalent were the two bidders who were in fray, but lost out to Dhanuka.
The Chennai bench of NCLT approved the resolution plan of Dhanuka Laboratories at Rs 1,116 crore, including the Rs 570 crore quoted by the pharma company, to take over Orchid Pharma under the Insolvency and Bankruptcy Code (IBC). Under the terms ordered, Dhanuka should have injected the bid amount into Orchid on Friday, but it is learnt that the company did not receive any fund inflows from Dhanuka.
The Resolution Professional (RP) or Orchid had said the Committee of Creditors (CoC) had approved the resolution plan with 67.07% in e-voting taken place between June 7- June 11, although one of the financial creditors, Punjab National Bank International Limited, reversed its vote to dissent via an e-mail.
The resolution plan of Dhanuka Laboratories was lower than Orchid Pharma’s liquidation value of Rs 1,309 crore. However, Dhanuka had proposed to pay Rs 570 crore to the creditors, to bring in a cash balance of Rs 322 crore and provide Rs 186 crore to the corporate debtor, besides infusing equity worth Rs 40 crore into the company. The bench noted that it was more concerned about the 1,407 employees of Orchid Pharma, who were eking their livelihood by working in this company. The tribunal has posted the case for hearing on August 28. This is the second bid for Orchid that has faced regulatory bump. Ingen capital submitted a bid for Rs 1,000 crore, but failed to bring in the funds which resulted in the collapse of the transaction. The RP was ordered by the NCLAT to call for fresh bids, which resulted in Dhanuka getting the nod.
The Times of India reported
27 July 2019: The insolvency regulator has notified rules that will give promoters and other stakeholder 90 days after the commencement of insolvency proceedings to re-take control of the company through agreements with creditors. The new rules also specify a limit of one year for the liquidation of such a company from the date of commencement of insolvency proceeding.
As many as 378 companies with total creditor claims of Rs. 2,57,642 crore have been sent into liquidation under the Insolvency and Bankruptcy Code till March 31, 2019.
“Where a compromise or arrangement is proposed under Section 230 of the Companies Act … it shall be completed within ninety days of the order of liquidation under subsections,” an Insolvency and Bankruptcy Board of India (IBBI) notification said.
Section 230 of the Companies Act allows for promoters or any class of creditors of a company to reach a compromise or arrangement with other stakeholders of the company to take control of the company.
Experts said this should provide a reasonable opportunity to stakeholders to reach a compromise or arrangement with stakeholder.
“Three months is a reasonable amount of time. The government is aiming to squeeze the timeline. If it is possible to complete the insolvency resolution process, including litigation, within 330 days then 90 days is a very reasonable amount of time for any scheme or arrangement,” said Manoj Kumar, head of M&A and Insolvency at legal firm Corporate Professionals.
The notification also mandates that a company must be liquidated within one year of commencement of liquidation proceedings. However experts have pointed out that achieving this goal may be unrealistic in cases where there are legal disputes surrounding assets especially like land and buildings.
“The lawmakers’ intention is to finish litigation within one year, but if certain assets are not liquidated in this time and there are costs associated with litigation over certain properties then from where will the liquidator realise those costs if proceeds from liquidation with one year have already been distributed?” questioned Kumar.
The Economic Times reported