The Supreme Court has rejected the Vedanta-led Electrosteel Castings’s plea seeking to defer the insolvency proceedings initiated by UV Asset Reconstruction Company (UVA) against it till the Debt Recovery Tribunal decided the existence of its debt and the validity of the purported assignment of a Rs 500-crore loan by SREI Infra to UVA.
ESL said that since DRT, Chennai has reserved its judgement, the National Company Law Tribunal (NCLT) proceedings initiated by UVA should be deferred till the former pronounces its judgment on April 8. DRT is deciding the status of UVA as a creditor of ESL and also the legality and validity of the purported assignment agreement by SREI.
“The outcome of the DRT application would undoubtedly have a bearing on the NCLT proceedings. If both these proceedings continue simultaneously, it may lead to dichotomous outcomes. In view of the SC judgment such an outcome would be contrary to the principles of judicial comity,” ESL told the apex court.
A bench, led by Justice MR Shah, dismissed as withdrawn ESL’s appeal against the NCLT order that dismissed its plea holding that the orders passed by the DRT will have no bearing in the IBC proceedings. Even NCLAT had upheld the NCLT order early this month.
The NCLT is scheduled to hear the case on March 31.
Stating that there is no debt in existence and the assignment of debt by SREI in favour of UV is void ab-initio, senior counsel Mukul Rohtagi, appearing for ESL, argued that the appellate tribunal had erred in holding that the NCLT can proceed to decide the Section 7 application despite the SC judgment holding that DRT would decide the fundamental issue of whether there is any amount due and payable by ESL to UVA.
ESL said that Vedanta in its resolution plan had taken over the ESL’s entire debt, including that of SREI aggregating to Rs 12,719.4 crore without any haircut through a combination of upfront cash payment and conversion of debt into equity shares.
Towards it claim of Rs 577.90 crore, SREI had received upfront cash payment of around Rs 241.72 core and equity shares of Rs 10 each towards the balance debt of Rs 336.18 crore, ESL said, adding that ‘despite discharge of the entire debt, SREI has sought to assign an alleged debt of Rs 595.45 crore on June 25, 2018 to UVA and that too after implementation of the resolution plan on June 21, 2018.”
