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Top court sets aside NCLAT order on Dhanuka’s offer for Orchid Pharma
Photo Credit: Reuters

The Supreme Court has set aside an insolvency appeals court’s order against Dhanuka Laboratories Ltd’s resolution plan to acquire debt-laden Orchid Pharma Ltd.

The apex court’s order effectively paves the way for the takeover of Chennai-based Orchid Pharma by Dhanuka Laboratories Ltd, whose resolution plan was approved by the National Company Law Tribunal (NCLT) in June 2019.

Orchid informed stock exchanges that the Supreme Court held that no provision in the Insolvency and Bankruptcy Code or regulations specify that a bid by any resolution applicant has to match the liquidation value.

State Bank of India (SBI), a key lender and member of Orchid’s Committee of Creditors, had filed the appeal with the Supreme Court to set aside an order by the National Company Law Appellate Tribunal (NCLAT). SBI argued that the appellate court erred by overriding the commercial wisdom of the lenders.

The Supreme Court allowed SBI’s appeal and quashed NCLAT’s judgment.

In November last year, the NCLAT had stayed the NCLT’s approval to the resolution plan submitted by Dhanuka Laboratories.

The appeals court had said that the offer, which was less than Orchid’s liquidation value, was against the principle of maximisation of assets. The NCLAT had given its order on a petition filed by Accord Life Spec Pvt. Ltd, an unsuccessful bidder for Orchid Pharma.

Dhanuka had emerged as the highest bidder for Orchid in June last year. However, just before e-voting by the committee of Orchid’s creditors was to close, Punjab National Bank (International) Ltd changed its vote and opposed the proposal.

Dhanuka's resolution plan had initially received a favourable vote by the committee of creditors with 67.07% voting share. The PNB unit later changed its decision, resulting in the vote share falling below the required 66%. This had prompted Accord Life Spec to approach the NCLT.

Following this, the NCLT had ruled in favour of Dhanuka’s offer.

Orchid Pharma was among the 28 large corporate defaulters in the Reserve Bank of India’s second list of debt-laden companies that were referred for insolvency in August 2017. It owes a total of Rs 3,200 crore to a consortium of 24 banks.

In 2018, Ingen Capital had emerged as the winner of the race to acquire Orchid with a bid of Rs 1,490 crore. However, Ingen later failed to make the payment.

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