On the 29th of January 2025, the Supreme Court struck down AGI Greenpac’s resolution plan for Hindustan National Glass and Industries Ltd (HNGIL). The Supreme Court struck down the resolution plan by AGI, saying it did not adhere to the IBC rules and that the plan did not have prior approval of the Competition Commission of India (CCI) before it was put to vote.
A bench comprising Justices Hrishikesh Roy, Sudhanshu Dhulia and S V N Bhatti was hearing a batch of appeals led by Independent Sugar Corporation Ltd against a September 18, 2023 judgement of the National Company Law Appellate Tribunal (NCLAT).
The court held the importance of procedural compliance and noted that AGI Greenpac had failed to get prior CCI approval – a procedure that has been put in place to ensure fair competition and no monopolistic practices.
Earlier, OpIndia published a series of articles where it was demonstrated how AGI Greenpac, the second largest glass manufacturer, wanted to acquire HNGIL, the largest manufacturer of glass, without taking prior approval from the CCI. The merger of the two companies would lead to a monopolistic company – something that the Resolution Professional and AGI Greenpac attempted to skirt by manipulating the procedural requirements.
The CoC was directed to reconsider the resolution plan by INSCO, which had the requisite CCI approval at that time.
After the landmark Supreme Court judgment, which nullified AGI Greenpac’s resolution plan for HNGIL, INSCO, the other bidder that had the prerequisite CCI approval at the time, approached the NCLT for a reconsideration of its bid. AGI, on the other hand, approached the Supreme Court with a review petition. In the review petition, AGI Greenpac urged the court to restrain the Committee of Creditors (CoC) from considering other resolution plans for the takeover of HNGIL. Essentially, with the Supreme Court’s ruling asking the CoC to consider other resolution plans that already had CCI approval, Independent Sugar Corporation (INSCO) owned by Uganda-based Madhvani Group would become the natural choice for the CoC – which would mean that INSCO’s resolution plan would be accepted, and HNGIL would be acquired by it subsequently. AGI Greenpac, with its review petition, wants to restrain the CoC from making that decision.
After the setback in SC because of procedural lapses, which seemed deliberate, the review petition of AGI Greenpac also seems to be riddled with certain fallacies.
AGI Greenpac claims their resolution plan is ‘commercially suprerior’: Analysis
AGI Greenpac’s review petition hinges on the claim that its resolution plan is commercially superior to INSCO’s. This, however, does not seem to be accurate, as already analysed by OpIndia previously.
AGI Greenpac’s proposal includes a deferred payment of INR 356 crore spread over three years in addition to an upfront payment of INR 1,851 crore. In contrast, INSCO’s resolution plan offers a more secure and direct financial structure without leveraging the corporate debtor’s own assets for financing.
INSCO’s resolution plan, in contrast, includes an upfront payment of INR 1,850 crore to financial creditors, an additional Rs 50 crore allocated to operational creditors, and 5% equity in the restructured entity, valued in the range of Rs 300 to 400 crore in a turnaround scenario.
Unlike AGI Greenpac, INSCO has sourced these funds entirely from its own resources, without relying on proceeds from the divestment or sale of HNG’s assets.
AGI Greenpac’s deferred payment structure is not a genuine financial commitment but a calculated scheme that relies on the sale of HNG’s Rishikesh plant to generate funds.
This approach by AGI Greenpac is fundamentally flawed. Following are the problems with the approach taken by AGI:
Using the Corporate Debtor’s Own Assets for Payment:
- AGI Greenpac has proposed to raise the deferred amount from the proceeds of HNG’s Rishikesh plant divestment. Essentially, AGI Greenpac is not bringing in fresh funds but is relying on the very assets of the corporate debtor to pay its dues.
- This maneuver directly contradicts the principles of insolvency resolution, where a resolution applicant is expected to inject fresh capital rather than use the debtor’s own resources to meet its obligations.
Contradicting the Insolvency & Bankruptcy Code (IBC) Framework:
- The IBC framework mandates that a resolution plan must maximize value for creditors. AGI Greenpac’s deferred payment model, financed through asset stripping, fails this test.
- This strategy undermines the core principle of ensuring the revival of the corporate debtor while protecting creditor interests.
AGI Greenpac’s questionable conduct: Misleading the court?
As reported earlier, AGI, along with the resolution professional in this case, have deployed questionable tactics to win the bid, opaque financial engineering being one of them.
The resolution process demands transparency and financial prudence. AGI Greenpac’s reliance on deferred payments backed by asset liquidation could be an attempt to game the system while presenting an illusion of a higher bid value.
AGI Greenpac’s attempts to delay the resolution process?
In addition to its review petition, AGI Greenpac has also filed a fresh Interlocutory Application (IA) in the National Company Law Tribunal (NCLT) Kolkata, further creating a bottleneck in the approval process. AGI Greenpac has made submissions before the NCLT Kolkata bench led by Justice Bidisha Banerjee, arguing that the NCLT should not proceed with the approval of the resolution plan until the Supreme Court decides on its review petition.
By attempting to stall the implementation of a legally approved resolution plan, AGI Greenpac could potentially be obstructing the insolvency resolution process and causing undue losses to the creditors and stakeholders of HNG.
It is important to note that the HNGIL resolution process is the longest-running IBC case in India. The delay has caused losses to members of the CoC – led by SBI, a govt bank – to the tune of hundreds of crores. With the Supreme Court’s judgment going against them, AGI may be attempting to delay the proceedings further.
In essence, AGI Greenpac, at this juncture, must not be permitted to delay the proceeding any further, causing crores of loss to CoC – led by SBI.
Upholding the review petition may set a dangerous precedent, allowing resolution applicants to manipulate the process by inflating bids with deferred payments sourced from the corporate debtor’s own assets.
