NCLAT admits ARC plea in Synergies Dooray case

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NCLAT’s three-member bench, led by chairperson justice SJ Mukhopadhaya, will hear the matter on November 6. (File)

Admitting asset reconstruction company Edelweiss’ appeal, the National Company Law Appellate Tribunal (NCLAT) on Wednesday said it will look into the resolution plan in the Synergies Dooray Automotive case, the first case of debt recast plan to be approved under the Insolvency and Bankruptsy Code (IBC).

Alleging that “a fraud was perpetrated by Synergies Dooray, the corporate debtor, its related party, Synergies Castings (SCL) and Millennium Finance (MFL)”, Edelweiss had approached the NCLAT seeking to set aside the August 2 order of the Hyderabad bench of the National Company Law Tribunal (NCLT) that had dismissed its plea for scrapping the debt recast plan.

NCLAT’s three-member bench, led by chairperson justice SJ Mukhopadhaya, will hear the matter on November 6.

Stating that the resolution plan can be challenged only on limited grounds, the bench said if the plan was not accepted before it, it will look into the process through which the resolution plan was arrived at.

In the Synergies Dooray case, the lenders — Edelweiss Asset Reconstruction Company, MFL and Synergies’ sister firm SCL — had to take a big haircut of more than 90% on their original outstanding amount.

Edelweiss had `86.92 crore exposure to the firm.

“The Appellant (Edelweiss) was shocked to note that SCL had purportedly assigned a major portion of its debt holding in corporate debtor (Synergies Dooray) to MFL allegedly on November 26. The corporate debtor and SCL have colluded to perpetrate fraud on the creditors of the corporate debtor since the beginning,” it said in its appeal.

Edelweiss challenged the resolution process as its voting rights in the committee of creditors drastically came down despite being one of the largest financial creditors, mainly because of the debt assignment agreement entered between SCL and MFL.

The asset reconstruction company alleged that the agreement between SCL and MFL constitutes a mala fide suppression of material facts and the validity of the agreement is also in contravention of the provisions of the law as it is replete with infirmities and misrepresentations.

Alleging that the insolvency professional has committed material irregularity in exercise of power, it also said the debt recast arrangements were “sham transactions and fraud perpetrated on the financial creditors”.