In a first, NCLT allows Synergies Dooray merger with subsidiary under IBC

SDAL was into manufacturing of aluminium alloy wheels before it was stopped its operations

Hyderabad-bench of National Company Law Tribunal (NCLT) has approved an insolvency resolution plan for Synergies Dooray Automotive Limited (SDAL), which used to supply aluminium alloy wheels to global car makers such as Ford, in a first ever order issued under the Insolvency and Bankruptcy Code (IBC), 2016.

Visakhapatnam-based aluminium alloy wheels maker Synergies Castings Limited (SCL), which is a related party, will merge SDAL in a scheme of amalgamation as part of the insolvency resolution plan, as per the NCLT orders.

On January 23, NCLT had admitted the corporate debtor's (SDAL's) petition seeking IR under 30(6) and 31 of IBC, 2016. This was said to be the first application filed before an NCLT bench under the new bankruptcy code.

SDAL, which was incorporated in the year 1995, was into manufacturing of aluminium alloy wheels before it was stopped its operations.

The petitioner had a debt of Rs 972.15 crore, owed to four financial creditors, including Synergies Castings (Rs 89.26 crore), which shares the same office address with the corporate debtor.

Alchemist ARC Limited (Rs 122.06 crore), Edelweiss ARC Limited (Rs 86.92 crore) and Millennium Finance Limited(Rs 673.91 crore) are the other three financiers. Edelweiss ARC had taken over the debt from EXIM Bank, which had earlier pursued legal remedies to recover its loan from the company.

The approved IR plan was prepared by the company's Insolvency Resolution Professional (IRP) Mamta Binani.

The IRP had received the resolution plans from three entities, namely SMB Ashes Industries, Synergies Castings Limited and Suias Industries Private Limited, the committee of creditors (COC) has selected the one submitted by Synergies Castings with certain modifications by a majority vote while Edelweiss ARC has obtained from voting.

Earlier, Edelweiss ARC also filed an objection before the NCLT stating that the approved resolution plan of Synergies Castings was in contravention of certain sections of IBC.

Edelweiss ARC had further alleged that Millennium Finance Limited was wrongly included in the COC as the financial creditor of the corporate debtor based on the alleged three assignment agreements evenly dated November 24, 2016 and were not executed in accordance with law. It has questioned the approval of SCL's resolution plan as it was a related party of the corporate debtor.

However, these objections were set aside by the bench.

"The resolution plan also envisages for insolvency resolution of SDAL and ensure continuity of business along with most effective use of the assets and equipments of SDAL and the amalgamation of the corporate debtor with the resolution applicant will bring in the number of operating and financial synergies, since both the companies relates to aluminium alloy wheel manufacturing industry .." the bench said in its orders.

The resolution plan is to be funded against receivables from other corporate debtors and through operations. The payments to the creditors, as well as the statutory payments, will be staggered over a period of six years, according to the NCLT orders.