Chennai: In a major setback to Ingen capital, the National Company Law Appellate Tribunal (NCLAT) has called for a response to a show cause notice on why action should not be taken against Ingen Capital on failing to pay Rs 1,000 crore as specified in the approved Resolution Plan for Orchid Pharma. Ingen has been given three weeks time for the same, starting March 1. According to recent media reports, the tribunal has warned Ingen’s directors Umesh Bhatia and Harish Bhatia of contempt proceedings and arrest if they failed to respond.
Established in 1992, Orchid Pharma was founded by Kailasam Raghavendra Rao, an alumnus of IIM Ahmedabad. Orchid’s main products included active pharmaceutical ingredients, including cephalosporins (oral and injectable), carbapenems and penicillin.
Over the years, the pharma giant went bankrupt with debt amount of more than Rs 3200 crore, which it had taken from a consortium of two dozen banks, Orchid’s debt increased which resulted in defaults on interest payments. In April 2018, Orchid Pharma was referred to the bankruptcy court by Lakshmi Vilas Bank in financial claims of Rs 3,500 crore.
Orchid had been facing severe financial crisis with lenders and investors approaching legal forum for a remedy and was brought under the corporate debt restructuring scheme, initiated during 2013, for the revival of its operations.
Three rounds of bidding were conducted by the resolution professionals.
The Resolution Plan(RP) by Ingen Capital Group was approved by the NCLT on September 17, 2018, after the committee of creditors (CoC) cleared it. As per the resolution plan, which was for Rs 1,490 crore, Ingen was to infuse Rs 1,060 crore within five days of the plan approval.
When the company failed to pay the amount, the resolution professional moved the NCLT and it on October 10, 2018, ordered Ingen to deposit one-third of the amount ie. Rs 334 crore into the financial creditors’ escrow account to take the proceedings further. Ingent appealed the NCLAT against this order, but the appellate tribunal remanded the case back to NCLT to pass appropriate orders.
Ingen reportedly had sought to raise funds from JM Financial but failed to do so. Ingen had, in the procedures before the NCLT, sought to replace the appointed RP with another expert. It had alleged it was asking for only limited information from the RP to raise funds towards the debt component from JM Financial but it was not being provided this. Hence, it was unable to proceed as envisaged in the approved Resolution Plan. The NCLT had refused the plea, reports Business Standard.
The NCLT bench of SV Prakash Kumar, judicial member, and S Vijayaraghavan, member-technical, came down heavily on Ingen for failing to comply with the procedures after a resolution plan of the company was approved by the bench.
The tribunal observed that since there was no second resolution plan available, it ordered to undergo corporate insolvency resolution process(CIRP) from the stage of invitation of expression of interest and complete it in another 105 days.
The resolution professional, who sought to go in for fresh bid process yet again, informed the NCLT that he had received e-mails from Divis’ Laboratories, Gland Celsus Biochemicals and Fidelity Trading Corporation.
According to TOI, the bench said in its order, “The RP has also mentioned that he has received emails from Divi’s Laboratories, Gland Celsus Bio Chemicals and Fidelity Trading Corporation. Apart from this, he has also submitted that he has received oral enquiries from ART Capital, Everstone Group, AION Capital, Piramal Capital and Finquest Group, expressing interest in proposing resolution plans.”
Besides Ingen, bidders included financial investors Everstone, Piramal Capital, AION Capital, ART Capital and Finquest Group. Divi’s Laboratories, Gland Celsus Bio Chemicals and Fidelity Trading Corporation also evinced preliminary interest to take over the beleaguered bulk cephalosporin drugmaker.
In the recent past, the National Company Law Tribunal(NCLT) had rejected Ingen Capital’s resolution plan to acquire Orchid Pharma. The NCLT declined to approve the proposal complying Ingen’s failure to bring in the requisite money. Besides, the bench also directed to restart the complete process with fresh deadlines.
According to recent media reports, the NCLT noted “On January 24, by way of last chance, we allowed the appellant (Ingen) to state whether they unconditionally agree to deposit at least 1,000 crores with the registrar, NCLT, Chennai, without prejudice to the rights and contentions of the appellant and without compromising with the ‘resolution plan.”
However, Ingen’s counsel had said this would not be possible without it receiving specified information and documents.
“We allow Nishtha Chaturvedi to withdraw the vakalatnama and direct Umesh Bhatia (CEO of Ingen) and Harish Bhatia (executive VP of Ingen) to file show cause reply within three weeks, failing which this appellate tribunal may initiate a contempt proceeding against them and may issue bailable warrant of arrest,” reports TOI.
Ingen, in the meanwhile, had approached the NCLAT with an appeal, criticising the order passed by the NCLT bench which directed to deposit a third of the Rs 1,000 crore payable to secured creditors.