Edelweiss Asset Reconstruction Company limited Vs Synergies Dooray Automotive Ltd. And Other [CA (AT) (Insolvency) No. 169 – 170 of 2017] - Synopsis
Team SoOLEGAL 30 Oct 2020

In this case, Edelweiss Asset Reconstruction Company limited Vs Synergies Dooray Automotive Ltd. And Other [CA (AT) (Insolvency) No. 169 – 170 of 2017], The National Company Law Appellate Tribunal (NCLAT) rejected Edelweiss Asset Restoration Company's multiple pleas challenging the National Company Law Tribunal (NCLT) order of August 2, 2017, that approved the resolution proposal of Synergy Dooray Automotive (SDAL). Synergies Dooray's resolution proposal was approved by lenders to the debt-ridden company on June 24, 2017, with a 91.06 percent majority, presented by a related group Synergies Castings (SCL) that allowed for SCL to be combined with SDAL. The ARC also claimed that the resolution proposal of SCL, presented to the NCLT 's Hyderabad bench, was counter to the law and that the arrangement SCL signed with Millennium Finance (MFL) on November 24, 2016, to allocate a large part of the debt holding was null and entered into with the deceitful ulterior motive of reducing its voting rights.
Rejecting the petition, the bench observed that the appellant's contention that the merger and amalgamation of firms cannot be suggested in the resolution plan or that such an application is in violation of clause (e) of subsection (2 ) of section (30) is fit to be dismissed. The appellant argued that prior to the execution of the restructuring proposal, the Insolvency and Bankruptcy Code (IBC) did not contemplate or permit or provide for amalgamation, particularly in the event that such amalgamation has an impact on the corporate debtor's own extinction. In the order, the two-member NCLAT bench claimed that if a proposal was accepted, it may be argued that a structured amalgamation order was necessary under the provisions of the Companies Act, but that no such claim could be made at the time of approval of the resolution plan, which merely proposes a merger. It also found no concern with SCL's debt-assigning matter to MFL. Edelweiss contended that its vote stake in the Committee of Creditors was reduced from 41.59 percent to a mere 9.85 percent because of the 'particularly questionable and alleged assignment of debt by SCL to MFL.' On March 6, 2017, it filed a petition with the NCLT contesting the legality of the assignment agreements. It also proposed that the offer by SCL should be changed to make it more favourable for all stakeholders as the liquidation valuation was not accurately met and their benefit was adverse to the repayment to financial creditors with a 94 percent haircut. Apart from SCL, SDAL had two other bidders. 


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