The National Company Law Appellate Tribunal (NCLAT) has stayed the National Company Law Tribunal's (NCLT) order, which approved the resolution plan of Dhanuka Laboratories Ltd for the revival of Orchid Pharma Ltd, after a petition was filed by Chennai-based Accord Life Spec Pvt Ltd. The Bench has ordered that a notice be issued to the pharma company and others, and posted the case for hearing on August 28, 2019.

The NCLAT Bench, comprising Chairperson Justice S J Mukhopadhaya, Member (Judicial) Justice AIS Cheema and Member (Technical) Kanthi Narahari, said that the stay on the NCLT order would continue during the pendency of the appeal and the Interim Resolution Professional (IRP) would ensure that Orchid Pharma did not hand over the possession of the company to Dhanuka Laboratories without prior permission of the appellate tribunal.

Accord Life Spec, part of the Rs 1,700 crore Accord Group, was established by DMK leader and former Union minister of state S Jagathrakshakan. The company had bid for Orchid Pharma after the Committee of Creditors (CoC) failed to find a successful bidder for the pharma company in its first attempt, which saw a successful resolution plan by US-based Ingen Capital annulled by the NCLT over its alleged failure to pay according to the resolution plan. Apart from Accord Life Spec, Dhanuka Laboratories and Covalent Laboratories had also bid for Orchid Pharma.

The CoC had selected the proposal of Dhanuka Laboratories and gone ahead with the voting even as Accord Life Spec approached the NCLT against CoC's decision. The selection Dhanuka's resolution plan ran into trouble after one of the CoC members - Punjab National Bank (International) – sent an email seeking to change its e-vote to dissenting before the voting period was over. Dhanuka's resolution plan, which initially got 67.07 per cent votes on favour as against the regulatory requirement of 66 per cent, once the change was considered, would have fallen to 65.53 per cent, thereby falling short of the required voting percentage. The IRP informed the stock exchanges that he would submit the result to the NCLT for its consideration and guidance on the revised voting of PNB International.

Accord Life Spec approached the NCLT arguing that Dhanuka's application had fallen short of requisite votes from the CoC and it was ready to revise it's quote to Rs 615 crore if there was a favourable order from the NCLT. The NCLT bench comprising of BSV Prakash Kumar, member (juducial), and S Vijayaraghavan, member (technical), in an order dated June 25, observed that while Punjab National Bank (International) Ltd had sent an email it had not placed any grievance before the NCLT. It approved Dhanuka's resolution plan observing that PNB International simply sending an email against voting need not be taken into consideration.

While the resolution plan value was Rs 570 crore, which is lesser than the liquidation value of Rs 1,309 crore, the NCLT Bench noted that according to the RP's explanation, Orchid Pharma already had a cash and bank balance of Rs 321.98 crore, and an amount of Rs 184.06 crore reversed to it by State Bank of India after Dhanuka agreed to infuse Rs 40 crore as equity into the company, which put together would be around Rs 1,116.04 crore, almost equivalent to the liquidation value of the company.

The NCLT also said that since there was no other plan more feasible and viable than the existing plan and there being no mandate saying that the Resolution Plan value shall always be more than the liquidation value of the corporate debtor, in order to let the company remain as going concern and to close the long drawn process, it was approving Dhanuka Laboratory's resolution plan. Around 1,407 employees are eking out their livelihood by working in the company and if there is no solution, the immediate effect will be on the employees. Besides, if the company is revived and generates revenue, it will also be beneficial to the state, observed the bench. It also dismissed Accord Life Spec's request for a favourable order against its bid.

Accord Life Spec, in the NCLAT, alleged that while the liquidation value of Orchid Pharma was assessed at Rs 1,309 crore, Dhanuka's offer was of a total of Rs 1,116 crore including Rs 506.04 crore of Orchid Pharma and Rs 40 crore, which was proposed to be infused for operation of the company. However, the resolution plan submitted by Accord Life Spec is also less than the liquidation value.