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The rise and fall of videocon: a detailed account of its success and decline.

Kirti Pimpalgaonkar

Created on 09 Mar 2021

Wraps up in 5 Min

Read by 28.3k people

Updated on 06 Jul 2024

From BnW to Colour TVs to LCD/LED to Smart TVs- the evolution of the television has been quite a journey! But did you know that Videocon was the first company to launch colour TVs in India in 1982? Without Videocon's colour TVs, modern-day Android TVs would have been a distant dream for us.

Anyway, this company is shutting down soon, having been dragged to the NCLT for insolvency proceedings in 2018. And so it becomes imperative for us to look at how a pioneer of this amazing invention is approaching its doom.

About Videocon Pvt. Ltd

Videocon Industries was founded in 1979 by Venugopal Dhoot, and its headquarters are in Mumbai. It initially started dealing in consumer electronics and home appliances such as mobile phones, colour TVs, and air conditioners. After becoming a popular brand in these sectors, they became a conglomerate and diversified their business in Oil and Gas, Telecom, and DTH Services.

Beginning of the End

The downfall of Videocon derives its traces from a time when there was an immense capital requirement in the television and allied sectors, but the returns were not adequate to control the debt. So, it made business sense for Videocon to diversify into unexplored territories. This diversification led to aggressive borrowings for the company, which led them into a debt trap over a span of 10 years.

Despite becoming a conglomerate, only Videocon's consumer electronics segment could propel the company forward. But even this lifesaver started to deteriorate with time due to increased competition and saturation in this market. 

Hence, the company tried to control its debts by divesting itself of its business. It merged its DTH Services with Dish TV and even sold its gas fields. Airtel acquired its telecom business. But it was all too late to have any effect. 

Current Status of Videocon

Videocon's current financial performance is showing a rather depressing picture:

The Sales growth has declined 50% over the past 5 years.

The company stopped being profitable in FY 2014, and its profitability has been reduced by a massive 300% over the past five years.

The promoters (holding around 40.6% of total shares) have pledged 98.8% of their equity.

The operating cash flows have also been negative since FY 2018.

Continuous Involvement in Scams

Even when the company was at NCLT's doors for insolvency, the FIR registered by CBI just damaged its reputation. This was due to the irregularities in loans sanctioned by ICICI Bank in 2012 when Chanda Kochar was the bank's CEO. She and her husband got a part of the loan as a bribe from the promoter, Venugopal Dhoot.

As mentioned above, the CBI alleged irregularities in Videocon's 2008 acquisition of the 10% stake in the Golfinho-Atum oil and gas field. The inquiry revealed that a consortium led by SBI sanctioned a loan of $2773.6 million to Videocon for these bids. CBI alleged that the loan amount was siphoned to other accounts and businesses.

Also, the company lost nearly Rs 21000 Crore in the 2G Spectrum Scam after the Supreme Court revoked its licences in 2012. This made the telecom business unfeasible and forced it to sell the spectrum to Bharti Airtel to recover damages to some extent.

The Insolvency of Videocon

Videocon was finally admitted to the NCLT for insolvency proceedings in 2018. The total claims among the different Videocon Group companies totalled a massive ₹ 88000 Crore, thus breaking all records of bankruptcy cases seen so far. You might be thinking that if the process commenced in 2018, it should have been finished by now.

But how can we expect anything else when this large group of 13 companies is becoming insolvent? Thirteen insolvency proceedings will take a lot of time, and the COVID-19 pandemic has further added to the delay in these proceedings.

Moreover, some loans were taken jointly by the companies, but they tried to resolve things individually. Imagine the lender's reaction while giving the loan to this big group and later being approached by individual subsidiaries, informing them that they have all become insolvent. You will sympathize with them. Further, this entire fiasco led to the double-counting of claims. It created more confusion than the movie Inception!

Meanwhile, the lenders tried to sell overseas oil assets. But the promoter Venugopal Dhoot opposed it by contending that it belonged to foreign subsidiaries, which are not insolvent. The Supreme Court accepted his plea, ensuring that the foreign companies were safeguarded to some extent.

The court decided to consolidate the companies and initiate a combined trial. The creditors have accepted Twinstar Holdings Limited, a Vedanta Group Company, 's proposal for ₹ 5000-6000 crore, which is only 16-20% of the lenders' total dues.

Closing Words

The Videocon Group, once a pioneer of colour TVs, is now on the verge of getting liquidated. Its downfall started with its decision to diversify its business into various sectors by taking a lot of debt and not using leverage efficiently. It might not have been the case if they had made their dominant consumer electronic sector better instead of taking a substantial risk and subsequently selling other businesses. But “the biggest risk is not taking any risk.” Right?

Anyway, the current performance is getting worse, with negative cash flows , extensive sales and profit declines, and never-ending debt. Besides being financially embarrassed, their image has also deteriorated due to their involvement in many scams, the most notorious one being the ICICI Loan Scam.

Videocon filed for bankruptcy under the Insolvency and Bankruptcy Code in 2018. However, several complications concerning loans have delayed the process. As of now, the Vedanta Group is taking over the insolvent Videocon Group, but the legalities have not been finished yet.

Maybe this time, a saviour will bring in a turnaround for Videocon.

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Explained: The twists and turns in the Videocon insolvency case

All eyes are now on the NCLAT

On June 8, the National Company Law Tribunal approved the resolution of the bankrupt Videocon Industries, paving the way for billionaire Anil Agarwal’s Twin Star Technologies to take over the consumer durables to the oil group. 

Twin Star Technologies offered Rs 2,962 crore for 13 group firms of Videocon. These included Videocon Industries, Videocon Telecom, Evans Fraser & Co, Millennium Appliances India, Applicomp, Electroworld Digital Solutions, Techno Kart India, Techno Electronics, Century Appliances, Value Industries, PE Electronics, CE India and Sky Appliances. 

The NCLT approving the proposal of Twin Star Technologies would mean another high profile insolvency case concluded. However, the offer of Rs 2,962 crore, when viewed against the admitted claims of Rs 64,838 crore was very meagre and lenders would have to take a haircut of over 95 per cent. 

It was the smaller lenders like Bank of Maharashtra, IFCI, Morgan Securities, SIDBI and ABG Shipyard dissented, even as some of the top lenders voted in favour of the proposal. 

The resolution has since been put on hold by the National Company Law Appellate Tribunal (NCLAT) after the dissenting creditors filed an appeal in July. 

Adding a further twist, Venugopal Dhoot, the promoter of Videocon Industries, has also moved the NCLAT challenging the insolvency court’s order approving the bid of Twin Star Technologies. He had earlier offered to pay up for the withdrawal of insolvency proceedings, but his proposal clearly seemed to have been rejected by the committee of creditors. 

Dhoot now wants the appellate court to set aside the NCLT order and wants the NCLAT to direct the lenders to consider the Rs 31,789 crore settlement plan submitted by him.   

Dhoot’s contention is that the assets owned by Videocon Group, particularly oil and gas assets owned by Videocon Industries, were not included in the information memorandum and no valuation thereof had been considered.

Dhoot has invoked Section 12A of the Insolvency and Bankruptcy Code, which allows the Committee of Creditors (CoC) to withdraw an insolvency case and consider an offer made by the promoter. It can be approved by 90 per cent voting share of the CoC. 

Dhoot in his appeal to NCLAT has requested that a fresh resolution plan should be considered with oil and consumer durable assets. 

The Insolvency and Bankruptcy Code was passed so that there would be time-bound resolution of stressed assets. But, the Videocon resolution is a classic instance where while the case has been settled, the creditors are recovering only a tiny portion of their dues. 

Legal experts agree that the Videocon resolution offer is low and needs to be relooked at. 

“If the said accepted bid is barely perused, it can be analysed that the same is undervalued, therefore irrational of the creditors to accept it. The fair value of Dhoot’s Videocon according to the registered valuers is around Rs 4,000 crore. The CoC members, mainly banks are facing a 95 per cent haircut if Twin Star acquires Videocon per the NCLT order. Thereby, NCLAT’s stay on the acquisition of Videocon is a welcome move,” Sonam Chandwani, managing partner at KS Legal & Associates, told THE WEEK. 

What’s worth noting is that even as the NCLT had approved Twin Star’s proposal, it had been critical of the deal. 

“The successful resolution applicant is paying almost nothing and 99.28 per cent hair cut is provided for operational creditors (hair cut or tonsure, total shave),” were the strong words from the NCLT in the written verdict. 

It had requested the committee of creditors and the resolution professional to increase the payout amount to the operational creditors. 

The NCLT was also surprised that the resolution applicant had valued the assets and liabilities of all the 13 companies and arrived at almost the same value and so “doubt arises” on the confidential clause, it had said.

The Videocon case raises several questions: Why was a deal that offered so little value accepted by the committee of creditors (CoC)? Why was Dhoot's offer overlooked? The confidentiality issue also needs examining. 

The NCLAT will certainly look at the entire case again, but whether it will rule against the NCLT verdict needs to be seen. The hearing in the NCLAT will be closely eyed for sure.  

Even Dhoot may perhaps have to come up with an improved plan to get the CoC approval for a better deal, feels Chandwani. 

Videocon’s insolvency case is far from over and Agarwal and his Twin Star Technologies will have to wait for some more time if at all they are to get their hands on a company that was once a strong homegrown player in the country’s consumer durables market.

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The strange case of Videocon’s insolvency

The twists and turns in the videocon bankruptcy proceedings have called into question the integrity of the ibc, which was touted as a game-changing mechanism to resolve the problem of bad debt..

Published : Aug 08, 2021 06:00 IST

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Venugopal Dhoot, the defaulting promoter of the Videocon group.

The multiple encounters of the now-bankrupt Videocon Industries, the durables-to-energy corporate group, with government agencies and the courts on charges of violations of one kind or another get curiouser by the day. Having put behind media attention on allegations such as corruption and fraud in its credit dealings with ICICI Bank and its high-profile chief executive Chanda Kochhar, and the illegal diversion of funds meant for overseas oil investments (for which its offices were raided as recently as July 17), the group is again in the news. This time it is because of the twists and turns in the bankruptcy proceedings that followed its default on a pile of debt.

These proceedings in the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) have called into questioned the vigour and integrity of the Insolvency and Bankruptcy Code (IBC), which has been touted as a game-changing mechanism to resolve the problem of accumulated bad debt in the books of India’s banks.

To understand the implications of the Videocon saga, a brief foray into its history is in order.

A history of insolvency

At different points of time in 2018, creditors filed applications to initiate resolution proceedings against different Videocon group companies, given their failure to meet their debt service commitments. The defaulting promoter, Venugopal Dhoot, and a principal creditor, the State Bank of India, approached the Mumbai bench of the NCLT. Following this, in August 2019, and in what was a first instance, the NCLT ordered the consolidation of 13 of these separate proceedings into one case covering the group to be heard by a single adjudicating authority. The consolidation was presented as a new initiative “to be utilised as a mechanism to maximise the value of a financially stressed group of companies.”

Once initiated, the insolvency proceedings took much longer than mandated by the IBC. In mid June 2019, the NCLT approved a resolution plan for the recovery of proceeds to partly cover the non-performing debt of Videocon Industries. The plan was based on an offer made by Twin Star Technologies, a company belonging to the mining conglomerate Vedanta, and accepted by a committee representing the creditors exposed to Videocon. This was the first group-based resolution award since the IBC process was put in place.

That award has, however, not brought the Videocon saga to its end. While granting approval, the NCLT noted that the scheme involved Vedanta paying almost nothing, with its offer amounting to 4.15 per cent of the outstanding admitted claims of more than Rs.64,000 crore and the creditors settling for a “haircut” of 95.85 per cent. Moreover, the NCLT felt it necessary to request the Insolvency and Bankruptcy Board of India (IBBI) to examine whether confidentiality requirements had been met in the resolution process, since the bid was so close to the liquidation value at which assets could probably have been sold as scrap. Twin Star’s successful bid offered creditors Rs.2962.03 crore, whereas the valuers had estimated the liquidation value at Rs.2568.13 crore. By flagging the small difference between the two, the NCLT was implicitly casting doubts on the integrity of the resolution process which requires that the liquidation value be kept confidential until all offers were made.

The resolution plan appears suspect also because of the control that Vedanta would obtain over the Ravva oilfield in the Krishna-Godavari basin with the takeover of Videocon. Videocon holds a 25 per cent stake in the oilfield, which is higher than the stake of 22.5 per cent that Vedanta holds through Cairn. If Vedanta gets control over Videocon Industries for “almost nothing”, as the NCLT opined, its stake in the Ravva oilfields would rise to 47.5 per cent.

Videocon’s oil assets

In 2018, the Ministry of Petroleum and Natural Gas had sent Videocon a controversial claim (rejected by an international arbitration tribunal) demanding the dollar equivalent of Rs.2,245 crore, which was the unpaid profit petroleum due to the government as part of a “production sharing contract” between the government and the Oil and Natural Gas Corporation Limited (ONGC), Videocon Industries, Vedanta and Ravva Oil (Singapore). ONGC held a 40 per cent stake in the oilfield. The resolution professional overseeing IBC proceeding relating to Videocon took the matter to the NCLT, which ruled that once insolvency proceedings are initiated as per the IBC, a moratorium comes into force and no dues can be recovered from the corporate debtor outside of the resolution plan.

Whatever the merits of the government’s claim, there can be little doubt that Videocon’s oil assets that Vedanta would acquire are quite attractive to the latter, strengthening the suspicion that the final settlement was far too low. Remarkably, the government’s demand in terms of profit share alone was almost equal to the estimated liquidation value of the assets of Videocon Industries.

The fact that despite such evidence and its own apprehensions, the NCLT found it necessary to approve the resolution plan suggests that the IBC resolution process is neither “efficient” and “time-bound” as claimed, nor capable of extracting a fair value out of the assets available to compensate creditors. That the resolution plan appeared suspect was what triggered other actions that have stalled the process.

On July 19, the NCLAT stayed the NCLT’s approval of the resolution plan, which was challenged by the Bank of Maharashtra and the Industrial Finance Corporation of India (IFCI). The principal grounds of the challenge were that while the corporate debtors in the group had cash balances of Rs.200 crore, the successful resolution applicant was bringing in only Rs.262 crore in cash, the rest being in non-convertible debentures payable in six years, and that even the first payment of upfront cash of Rs.200 crore would be made after a significant time interval.

Meanwhile, in keeping with his brazen and quirky behaviour, Venugopal Dhoot requested the NCLAT to quash the NCLT approval of the resolution plan, and require the NCLT to consider a Rs.31,789 crore offer he had made to the creditors to take back the assets. He has reportedly held that the resolution professional was in error for not having flagged the foreign oil and gas assets of Videocon in the information provided to potential bidders. Given the opposition to the defaulting corporates’ recovery of their own assets by settling debt at a discount, Dhoot’s bid is unlikely to go through.

The mess caused by this much-delayed, first-of-a-kind effort at consolidated group-wise resolution of bad debt has given rise to questions that erode the legitimacy of the IBC process. It raises questions about the decisions taken by the resolution professional and the dominant voices in the committee of creditors, and about the integrity of the valuation process. Why was the liquidation value of assets that included oil and gas assets set so low? Why was the Vedanta bid so close to the liquidation value? Why was the committee of creditors willing to accept such a low bid? Why is Venugopal Dhoot willing to pay such a large sum to win back assets that he let slip from his hands?

Among the things the IBC was designed to ensure, ostensibly to speed up resolution and improve recovery rates, was to empower the committee of creditors and the resolution professional. Within the frame of the process the IBC laid out, the decisions of these players were binding. If the NCLT could not establish that the prescribed process had been deviated from, it could not turn down these decisions, in the absence of opposition from an adequate number of creditors. Of the two powerful sets of players, the members of the committee of creditors at least have a stake in the game, benefiting from higher recovery. That is not true of resolution professionals who are paid to manage the company and its assets until the process is complete, during which time they exercise immense power.

As Arush Khanna of Numen Law Offices notes ( Indian Express July 31, 2021), Section 25 of the IBC, that defines the “Duties of resolution professional”, does not even require the resolution professional to maintain confidentiality of sensitive information that could affect the valuation of the corporate debtor. Given their powers and access to information, some resolution professionals may engage in acts that subvert the integrity of the process. Recognising this possibility, the IBBI has decided to monitor and institute strict disciplinary proceedings for insolvency professionals, with penalties for violations of the code of conduct, including that of terminating their licence to practice.

But even if this late course correction proves to be a deterrent, it is likely to hurt the resolution process by increasing litigation and worsening the problems of long-delayed resolution and low recovery rates. The best solution is to keep down the volume of non-performing assets. That should be possible if banks do not have large joint exposures to a single corporate group, which is plied with credit even as the evidence suggests that it has not been acting in good faith or been responsible in meeting commitments. That raises the most important question: why d id Videocon’s creditors act the way they did?

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Bringing you the Best Analytical Legal News

SBI v. Videocon Case: Doctrine of Substantial Consolidation

Ritisha Gupta Research Assistant, Corp Comm Legal

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One major issue with the Insolvency and Bankruptcy Code of 2016 is the lack of provision for fair value for the insolvent industries as a going concern, with respect to the interest of the creditors. This issue is highlighted even more in “group companies” where a corporate veil has been created. The entities are interdependent on each other and this precludes them from benefiting from appropriate resolution plans, thus resulting in liquidation with little or no recovery.

To tackle this issue, the doctrine of substantial consolidation, which is widely used in US and UK bankruptcy laws, is to make an advent in the Indian legislatures, supported by in the Report of the Insolvency Law Committee, 2018. This doctrine enables the adjudicating authority to merge the assets and liabilities of all such individual entities in a common pool, resulting into a common corporate insolvency resolution process (CIRP). This not only maximises the asset value of the group company, but also attempts to eliminate cross-debts.

It is, thus, pertinent to analyse SBI v. Videocon Industries Ltd. 1 , where the National Company Law Tribunal (NCLT) Mumbai Bench recognised this doctrine and allowed consolidation of 13 of the 15 Videocon Group companies.

A consortium of banks led by State Bank of India, being the common creditor, moved a petition in NCLT Mumbai Bench, asking for the substantial consolidation of the group of 15 companies under the “Videocon Group”, to form the common debtor. This application was moved because a separate CIRP petition against each of the companies failed to attract bids due to their complex interdependence, and inability to pay off since they held no separate value or identity.

The NCLT Mumbai Bench analysed the case, with reference to previous US and UK case laws, and decided in favour of the consortium, grouping 13 out of the 15 companies into a single entity as the common debtor. The Bench left out two of their companies, KAIL Ltd. and Trend Electronics Ltd., out of the grouping because they did not have any operational dependency on the other companies and were strong financial entities.

The takeaway from this landmark judgment entails the doctrine of substantial consolidation, a concept that emerged primarily in the US bankruptcy regime. The doctrine enables the adjudicatory authority to merge the assets and liabilities of all such individual entities in a common pool, whereby involving them in a common CIRP.

The consortium of 18 banks had filed the petition for consolidation after Videocon Group of Companies defaulted on various loans and bank guarantees. The functions of the companies were so interlinked that it was difficult to ascertain their value as independent entities due to inability to segregate their assets and liabilities. Videocon Group’s consolidated financial statements, or existence of inter-corporate guarantees on loans further established their interdependence on each other. The question before the Bench was to analyse whether the consolidation so asked for, would be more beneficial than harmful.

Insolvency and Bankruptcy Code (IBC) being operationalised only in 2016, is still in its nascent stage, which is why a lot of developments are yet to happen in this front. The Report of the Insolvency Law Committee, on 26-3-2018 already paved a way for this doctrine to enter the Indian judiciary. It stated that:

“It was noted that the treatment of group companies within insolvency laws is a complicated subject. The current system of insolvency laws is new, and it may be too soon to introduce a complex subject, like the present issue.”

Basing its observations on this Report, NCLT Mumbai Bench stated that the problem of consolidation had cropped up sooner than expected, and a matter as pressing as this could not be avoided or deferred till legal provisions are established for the same. The Bench came up with a two-pronged test to determine the test for consolidation in this case.

T est for Consolidation

After hearing the facts presented, the Bench came up with the following two tests:

• A prima facie existence of elementary governing factors; and
• categorisation based on the governing factors.

For the first test, the Bench used the approach forwarded by the US bankruptcy courts and laid down a list of 14 factors, whose existence needed to be verified into, such as common control, common directors, common assets, common liabilities, interdependence, interlacing of finance, pooling of resources, coexistence for survival, intricate link of subsidiaries, intertwined accounts, interlooping of debts, singleness of economic units, common financial creditors and common group of corporate debtors. Subsequently, for the second test, the Bench called for the categorisation of companies based on the abovementioned factors.

The first category consisted of companies whose assets and liabilities were so interlinked that their segregation would result in little or no maximisation of asset value, whereas the second category would comprise of companies whose asset liability intermingling, when segregated, would still provide for viable profitable restructuring proposals.

Using the two tests, the Bench ordered for the consolidation of 13 out of the 15 Videocon companies, and left the remaining two, because they fell in the second category.

A nalysis of the Doctrine

Corporate law is based on the basic principles of limited liability, and separate legal entity, established by two landmark cases of Salomon v. Salomon and Co. Ltd. 2 and Lee v. Lee’s Air Farming Ltd 3 . The doctrine of substantial consolidation strikes at these principles, and in a way, could be termed as an extension of the concept of “piercing of the corporate veil”. However, the latter is a vertical merger of the subsidiaries with the parent company, whereas the former is a horizontal one.

Piercing of the veil is also a limited merger benefiting only one creditor, whereas substantial consolidation ensures an equitable distribution to all creditors. The reason behind these remedies is to identify and rectify the fraud committed by the corporate group. The first test established by the Bench tries to identify this “fraud”, by analysing to what extent the companies were intermingled. The second test then tries to balance the equity between consolidation and maintaining the separate legal identity of the entities. It ensures that only those companies are grouped together that will go into liquidation if separated.

The doctrine of substantial consolidation is well developed in decisions arising in cases under the US Bankruptcy Code (11 USC Section 101 and following). The Bankruptcy Code does not specifically authorise substantive consolidation, but the courts have derived their authority to substantively consolidate entities from the broad equitable powers found in Section 105 of the Bankruptcy Code. In Auto-Train Corpn. Inc. v. Midland-Ross Corpn. 4 , it was stated that in order to properly apply this balancing of interests, “a court must conduct a searching inquiry to ensure that consolidation yields benefits offsetting the harm it inflicts on objecting parties”. In Augie/Restivo Baking Co. Ltd., In re 5 , the Second Circuit Court of Appeals, came up with their test to determine the types of interrelationships shared by these companies, as ( i ) whether creditors dealt with the entities as a single economic unit, not relying on their separate identity in extending credit; or ( ii ) whether the affairs of debtors are so entangled that consolidation will benefit all creditors.

NCLT Mumbai Bench put reliance on several US and UK case laws, one of which being the case of Food Fair Inc., In re 6 , where the Bench held that the “key factor for granting substantive consolidation of all debtors is required to yield an equitable treatment of creditors without any undue prejudice”. Despite the new benefits arising from this new concept, substantial consolidation brings about a few challenges as well.

The consolidation does not always bring benefit to all the creditors. It goes against those creditors who extended monies to the company as an individual entity, rather than the group, and now will be forced to take this consolidation as their only way out by taking larger cuts in the common resolution plan from a common pool. Secondly, these creditors will also have their voting shares reduced in the committee of creditors (CoC) due to the proportionate reduction in the debt owed to them. Operational creditors are at severe disadvantage with some might even losing their right to be present in the CoC meetings.

NCLT Mumbai Bench thus allowed objection to consolidation balancing “equity between consolidation and maintaining corporate separateness”. This independence of the entity from other group companies emerged as touchstone of the doctrine test while creating the two categories.

C onclusion

To sum up, reliance should be put on whether consolidation brings more benefits than losses if not consolidated. The decision should be in favour of consolidation if the results are outweighing the cons, even if the entity is found to be self-sustainable and independent through the second test. The advent of doctrine of substantial consolidation will benefit recoveries in other large group company insolvency cases, while applying the broader principle of balancing equity between consolidation and maintaining corporate separateness of the entity.

* Ritisha Gupta Research Assistant, Corp Comm Legal, e-mail: [email protected]

1 2018 SCC OnLine NCLT 13182 .

2 1897 AC 22 .

3 1961 AC 12 : (1960) 3 WLR 758.

4 810 F 2d 270, 276 (DC Cir 1987).

5 860 F 2d 515 (2nd Cir 1988).

6 10 BR 123 (1981).

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How the Videocon saga finally came to a close?

In today's Finshots we discuss how Vedanta managed to take over Videocon for an absolute bargain

Before we get to the story, a brief introduction on how Videocon went from being pioneers to defaulters.

In 1986, three brothers started a company —  Adhigam Trading . They were selling paper tubes at first. But then, they began diversifying rapidly — manufacturing TV sets and washing machines. In fact, they were the first Indian company to acquire a license to manufacture color TVs. But they didn’t stop there.

By 1990, the company was adding products like air conditioners, refrigerators, and home entertainment systems to its offerings. In 1991, they rebranded to Videocon, and the company became one of the most iconic consumer electronics brands in the country.

But the brothers had bigger dreams.

They began exploring uncharted territories and set up businesses in Oil and Gas, Telecom, Retail, and DTH services. Unfortunately, these new businesses didn’t work out all too well. They were capital intensive and didn’t generate a lot of money. The firm’s debt began to spiral out of control. And finally, Videocon was admitted to the bankruptcy court (NCLT) in 2018. The claims against the group’s companies, Videocon Industries, and Videocon Telecommunications, added up to a whopping ~ ₹71,000 crore.

It was one of India’s largest bankruptcy cases ever.

Soon enough, the lenders got together to resolve the matter within the framework of India’s Bankruptcy Code (the IBC). But it was no easy task considering they had to value 13 different group companies belonging to Videocon. There was a lot of confusion at first but eventually, the registered valuation experts came up with two numbers.

A liquidation value of ~₹2,500 crores and a fair market value of ~₹4,000 crores.

Now right off the bat, even if you have no clue what these two values actually mean, you know the lenders are getting screwed over. They were claiming ₹71,000 crores in total and yet, the valuation experts were saying that the group companies were barely worth anywhere between ₹2500 crores and ₹4000 crores. It was a terrible proposition, to begin with.

But then, things get worse.

The liquidation value here is the absolute minimum you could expect. Imagine you were selling Videocon on a piecemeal basis — Getting the assets ready and auctioning them off one at a time. It’s a fire sale number and not a fair representation of what the assets may be worth to someone who could potentially put them to better use. This detail is captured by the fair market value. And while there’s not a lot separating ₹2,500 and ₹4000 crores, you still want to get close to the latter figure. You want the fair market value.

However, in this particular case, the winning bid came in at ~₹2,900 crores. It came from Twin Star Technologies, a promoter entity of the Vedanta Resources group. And the judges presiding over the case seem to have noticed something was amiss about the whole thing. See, once the valuation experts come up with a number, it is generally expected to stay confidential. Imagine Vedanta knew what the liquidation value was. You’d then expect them to offer a bid close to that figure. But if it stays confidential maybe they’ll bid higher.

However considering Vedanta threw a number pretty close to the actual liquidation value, the judges were a bit sceptical on whether the confidentiality clause was violated in some respect. More importantly, they were worried about how the lenders were getting a paltry sum in return.

~4% of all admissible claims — A truly pitiful number.

And you know who got bulldozed completely here? The operational creditors — suppliers who worked with Videocon. These guys were owed over ₹1000 crores and yet they’re only getting about 0.72% of what they were owed. As the judgment noted  —  “the Successful Resolution Applicant is paying almost nothing and 99.28% hair cut is provided for Operational Creditors (Hair cut or Tonsure, Total Shave)”

It is a total shave, alright.

And while the judges requested Vedanta and the lenders to offer these small companies some respite, they couldn’t overturn the resolution entirely because the lenders settled for this number. They complied with the law fully and the resolution had to go through.

As for Vedanta, they got what they wanted. Granted, Videocon is a shadow of its former self, but it does own something valuable. The beleaguered group owns a 25% stake in the Ravva oil field — located in the Krishna Godavari Basin, coastal Andhra Pradesh. That is what piqued Vedanta’s interest in Videocon in the first place. They already owned some stake in the oil field but now after the Videocon gambit, they own 47.5% of the asset. In fact, they will be the biggest stakeholder in the oil field ahead of ONGC.

So yeah, with this, we have another successful bankruptcy resolution. But at this point you have to ask yourself — If this is what success looks like, where are we really headed eh?

Until then…

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Videocon is a classic case of what debt can do to a company

Videocon Industries, an Indian electronic appliances maker, reported its annual financial results on Feb. 11. The company made a Rs1,367.94-crore loss  (pdf) in 2016 (Videocon uses the calendar year to report). That’s 24.5 times the loss it made in 2015. The whopping increase is due to two main reasons: falling revenues and high debt.

The Mumbai-based company  owes over Rs45,000 crore to lenders. This debt was accumulated over time as Videocon expanded into oil and gas, telecommunications, and direct-to-home (DTH) TV. However, its main business of electronic appliances is struggling to make the money required to service the debt, and the new ventures haven’t shown tremendous promise.

The Videocon case is classic of companies aggressively borrowing to expand but failing to repay. In 2016, its finance costs stood at Rs2,426 crore, primarily due to the interest paid. Compared to this, its operating profit was a mere Rs354.87 crore.

Videocon is among the most-leveraged groups in Asia’s third-largest economy. In fact, a Credit Suisse study in October 2015 named it among the 10 groups with the highest debt in India. Several experts, including former Indian central banker Raghuram Rajan, have repeatedly voiced their concerns about the ticking time bomb of corporate debt in India. These high borrowings often translate into toxic assets for banks. “Moderation is required and some debt is good. But not too much. Avoid over-borrowings to avoid problems,” Rajan said in December 2015.

Quartz tried to contact Anirudh Dhoot, director of Videocon, for a comment, but he wasn’t immediately available.

The Videocon story

The Videocon group began in 1955 when Nandlal Dhoot  started a sugar mill by importing machinery from Europe. In 1986, Nandlal’s three sons, Venugopal, Rajkumar, and Pradipkumar, started Adhigam Trading , a firm selling paper tubes, which later expanded to the manufacturing of television sets and washing machines.

Its growth in the 1990s, when it added more products such as air conditioners, refrigerators, and home entertainment systems, was synonymous with India’s liberalisation of its economy. On Feb. 14, 1991, the company changed its name from Adhigam Trading to Videocon Leasing & Industrial Finance.

Subsequently, it added more businesses and rapidly expanded, diversifying into oil and gas in the late 1990s and later even telecom, DTH entertainment, and retail. Through the 2000s, it was in a major expansion mode, mirrored by its rising debt. For instance, in February 2007 , US telecom giant Verizon tied up with it to provide long-distance tele-services in India. In the same year, Videocon, jointly with Bharat Petroleum Corporation, signed an agreement  to buy a Brazilian company to pursue oil exploration in the region.

But such expansion has come with risks.

The debt trap

Since 2007, Videocon’s debt has shot up by seven times. And that’s not all. The group’s interest paying capacity has deteriorated during the same time. Its interest coverage ratio, the ratio of operating profit to the interest payable, is below one, according to Credit Suisse. This means it doesn’t generate enough funds that can cover its annual interest payments.

Some 85% of its revenue comes from its consumer electronics business. In 2016, this segment saw a 15% drop in income. The Indian appliance and consumer electronics industry,  estimated to reach $20.6 billion by 2020, has lately seen weak growth. Mounting input costs are squeezing margins even though demand is growing. The industry has also seen a shift from off-line to online shopping.

Meanwhile, Videocon’s crude oil and natural gas venture saw revenues dip by 39% mostly due to a glut in global oil prices.

The group is now trying hard to trim debt. For one, it is selling off assets, something most leveraged Indian groups with their backs to the wall do. Over the last one year, Videocon has sold Rs11,000 crore worth of assets . It has also monetised other assets like spectrum, besides merging its DTH service with Dish TV.

It’ll be a long while though before Videocon comes out of its debt trap.

Suneera Tandon contributed to this story.

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VIDEOCON RULING: SETTING A BENCHMARK FOR GROUP INSOLVENCY

Richa Saraf

( [email protected] )

It is common business practice for group entities to regularly engage in related party transactions such as cross collateralisation, guarantee comforts, tunnelling or significant influence arrangements. While such structures largely respect the separate legal status of the group companies, practice suggests such inter-linkages in business, operations and management often raise significant challenges when any one or more entity in the group become insolvent [1] . In such cases, for maximisation of value to the stakeholders and to enhance the prospects of resolution, creditors may seek for substantive consolidation.

While the legal framework on group insolvency law is still a work in progress, in various cases, NCLT is taking cognizance of the corporate behaviour while adjudicating upon group insolvency matters. Recently, the Hon’ble National Company Law Tribunal Mumbai Bench, in the case of State Bank of India v. Videocon Industries Limited & Ors . [2] held that for the purpose of the corporate insolvency resolution process, the foreign oil and gas assets and properties, including any claim, interest therein, of Videocon Group held through the foreign subsidiaries of the Corporate Debtor will be regarded as the property of the Corporate Debtor.

Facts of the case:

Videocon Industries Limited (“ VIL ”) has been engaged in the business of telecommunications, consumer and electronic goods and oil and gas exploration. For the purpose, VIL established subsidiaries/step down subsidiaries (including overseas ones). The overseas oil and gas business was being taken care of by VOVL Ltd. (Indian), Videocon Hydrocarbon Holdings Ltd. (“ VHHL ”) and other step down subsidiaries (Overseas) which held participating interest (PIs) in oil and gas acreages.

VIL and VOVL also mobilised loans in VHHL, on the basis of SBLC facility availed by them as co-borrowers. While VIL was later released as a borrower, but a corporate guarantee was obtained from VIL.

On the basis that SBLC facilities were granted to VOVL and that VOVL has defaulted, the lenders were desirous of selling the PIs held by VOVL and the overseas companies. However, the Chairman of the Corporate Debtor filed an application before NCLT for determination of the following questions:

• Whether the foreign oil and gas assets and properties, including any claim, interest therein, of Videocon Group held through the subsidiaries can be said to be the property of the Corporate Debtor?
• Whether the provision of Section 14 of the Code would apply to the said foreign oil and gas assets and properties, including any claim, interest therein?

Group Insolvency Framework in India:

The NCLT, Mumbai Bench has, in its order [3] dated 08.08.2019, laid down certain parameters while ordering for consolidation of 13 Videocon group companies- (i) common control; (ii) common directors; (iii) common assets; (iv) common liabilities; (v) inter- dependence; (vi) interlacing of finance; (vii) pooling of resources; (viii) co-existence for survival; (ix) intricate link of subsidiaries; (x) intertwined accounts; (xi) inter-looping of debts; (xii) singleness of economics of units; (xiii) common financial creditors; (xiv) cross shareholding.

The Working Group on Group Insolvency, in its report dated 23.09.2019 [4] , has recommended that a ‘corporate group’ may include holding, subsidiary and associate companies, as defined under the Companies Act, 2013, however, an application may be made to the Adjudicating Authority to include companies that are so intrinsically linked as to form part of a ‘group’ in commercial understanding, but are not covered by the definition of corporate group above, as well. It was further stated that while procedural coordination mechanisms may be applicable only to those group companies which have defaulted, and which are covered by the Code for the purpose of insolvency resolution or liquidation, however, rules against perverse behaviour may be applicable to all group companies, regardless of their solvency .

The prevalence of corporate groups has thrown up special challenges which require modifications to the principle of treating companies within a group as completely separate entities [5] . In light of the aforesaid, it is pertinent to refer to precedents available across the globe.

Precedents Abroad:

Relying on In Re Raymond, 529 B.R. at 475 [6] and Logistics Information Sys., Inc. v. Braunstein (In Re Logistics Information Sys., Inc.), 432 B.R. 1 (D. Mass. 2010) [7] , In Re Cameron Const. & Roofing Co., Inc. 565 B.R. 1 (2016) [8] , the US Bankruptcy Code allowed consolidation and observed as follows:

“Bankruptcy courts may substantively consolidate two or more related entities and thereby pool their assets. Substantive consolidation treats separate legal entities as if they were merged into a single survivor left with all the cumulative assets and liabilities. Genesis Health Ventures, Inc. v. Stapleton (In Re Genesis Health Ventures, Inc.), 402 F.3d 416, 423 (3d Cir. 2005) [9] …. Substantive consolidation of two or more debtors’ estates is widely accepted. See, e.g., In Re Owens Corning, 419 F.3d 195, 207 (3d Cir. 2005) [10] ; In Re Bonham, 229 F.3d 750, 764 (9 th Cir. 2000) [11] ; Reider v. Fed. Deposit Ins. Co. (In Re Reider), 31 F.3d 1102, 1106-07 (11 th Cir. 1994) [12] ; Drabkin v. Midland-Ross Corp. (In Re Auto-Train Corp.), 810 F.2d 270, 276 (D.C. Cir. 1987) [13] . Substantive consolidation of a non-debtor with a debtor, as here, is less common, but increasingly accepted. The trend toward greater court approval of substantive consolidation has its genesis in the increased judicial recognition of the widespread use of interrelated corporate structures…. Eastgroup Props. [v. Southern Motel], 935 F.2d [245] at 249 [(1991) [14] ] (quoting In Re Murray Indus., Inc., 119 B.R. 820, 828-29 (Bankr. M.D. Fla. 1990) [15] ). Without the check of substantive consolidation, debtors could insulate money through transfers among inter-company shell corporations with impunity. In Re Bonham, 229 F.3d at 764 [16] .

Within this circuit, bankruptcy courts have approved the application of substantive consolidation to non-debtors, often in cases in which the non-debtor is a subsidiary or alter ego of the debtor. See, e.g., Gray v. O’Neill Props. Group, L.P. (In Re Dehon, Inc.), No. 02-41045, 2004 WL 2181669, at *3 (Bankr. D. Mass. Sept. 24, 2004) (Large corporations, such as the Debtor, often use multi-tiered corporate structures, and substantive consolidation has been used to reach the assets and liabilities of a non-debtor subsidiary corporation.); Murphy v. Stop & Go Shops, Inc. (In Re Stop & Go of Am., Inc.), 49 B.R. 743, 745 (Bankr. D. Mass. 1985) .”

In Re S & G Financial Services 451 B.R. 573 [17] , the US Bankruptcy Court held that consistent with the directive of Sampsell, it is well within the equitable powers of a bankruptcy court to allow substantive consolidation of entities under appropriate circumstances, whether or not all of those entities are debtors in bankruptcy. It further held that a bankruptcy court has the jurisdiction over non-debtor entities to determine the propriety of an action for substantive consolidation insofar as the outcome of such proceeding could have an impact on the bankruptcy case.

In Re Permian Producers Drilling, Inc., 263 B.R. 510 (D. Tex. 2000) [18] , the US District Court for the Western District of Texas observed as follows:

“The absence of any statutorily prescribed standard has meant that the responsibility for developing standards for determining whether substantive consolidation should be granted has been left largely to the courts. The courts, however, have not developed a universally accepted standard for substantive consolidation. Bonham, 229 F.3d at 765-66 [19] ; 2 COLLIER ON BANKRUPTCY ¶ 105.09[2]. Rather, whether the circumstances warrant substantive consolidation is a highly fact specific analysis that must be made on case-by-case basis. Bonham, 229 F.3d at 765-66 .

Under the more traditional test the elements test the existence of a combination of elements showing a strong relationship among the debtors is a prerequisite for substantive consolidation. The substantial relationship must also be coupled with additional elements such as commingling of separate assets and liability so as to make it prohibitively expensive or difficult to sort out the proper assignment and ownership of the assets and liabilities. The elements most commonly cited by courts under this test are:

(1) the degree of difficulty in segregating and ascertaining individual assets and liability;

(2) the presence or absence of consolidated financial statements;

(3) the profitability of consolidation at a single physical location;

(4) the commingling of assets and business functions;

(5) the unity of interests and ownership between the various corporate entities;

(6) the existence of parent and inter-corporate guarantees on loans; and

(7) the transfer of assets without formal observance of corporate formalities.”

  In Re Hemingway Transp., Inc. 954 F.2d 1 (1 st Cir. 1992) [20] , the US Court of Appeals observed that consolidation is permitted only if it is first established that the related debtors’ assets and liabilities are so intertwined that it would be impossible, or financially prohibitive, to disentangle their affairs [21] . Further, the court held that the trustee may request consolidation to conserve for creditors the monies which otherwise would be expended in prolonged efforts to disentangle the related debtors’ affairs [22] , however, while considering the application for consolidation, the bankruptcy court must balance the potential benefits of consolidation against any potential harm to interested parties. [See Also: In Re Steury, 94 B.R. 553, 554-55 (Bankr.N.D. Ill. 1988); In Re Amereco Envtl. Services, Inc., 125 B.R. 566, 568 (Bankr.W.D. Mo. 1991) [23] ; In Re Helms, 48 B.R. 714, 717 (Bankr.D. Conn. 1985) [24] ; In Re Ford, 54 B.R. 145, 148 n. 6 (Bankr.W.D. Mo. 1984) [25] ]

In Re Snider Bros., Inc., 18 B.R. 230 (Bankr. D. Mass. 1982) [26] , relying on the cases In Re Food Fair, Inc., 10 B.R. 123, 124 (Bkrtcy.S. D.N.Y.1981) and In Re Vecco Construction Industries, Inc., 4 B.R. 407, 6 B.C.D. 461, 1 C.B.C.2d 216 (Bkrtcy.E.D.Va.1980) [27] , the US Bankruptcy Court observed that the only real criterion is the economic prejudice of continued debtor separateness versus the economic prejudice of consolidation . While holding that there is no one set of elements which, if established, will mandate consolidation in every instance, the court observed that the fact that corporate formalities may have been ignored, or that different debtors are associated in business in some way, does not by itself lead inevitably to the conclusion that it would be equitable to merge otherwise separate estates.

Conclusion:

The following points are relevant while considering consolidation:

(a) One question that may arise here is who can apply for consolidation? Whether the corporate debtor or creditors may request for consolidation or whether reference has to be made only by the insolvency professional?

While the application in the case of Videocon was made by the Chairman of the Corporate Debtor (to reduce his exposure as a personal guarantor), in our view, the application for consolidation should be made for the general benefit of the creditors and not to safeguard the personal interest of the guarantors of the Corporate Debtor. This does not imply that merely because third parties like guarantors will be in an advantageous position, NCLT will not consider consolidation. However, it is recommended that the application is filed by the insolvency professional for maximisation of value to the stakeholders of the Corporate Debtor, and the NCLT considers the application based on the larger interest of all the stakeholders, and not for any particular set of creditors.

(b) Again, the next question may be whether NCLT may order for consolidation of a debtor with a non- debtor?

In the case of Videocon, the NCLT has allowed consolidation of solvent and insolvent companies. In fact, on analysis of the precedents cited above also, it is clear that the courts may order for consolidation of a debtor entity with a non- debtor or solvent entity, however, consolidation will not be a general principle, and will depend on the facts and circumstances of each case.

(c) Further, in cases where the consolidation involves foreign companies, whether the courts can overlook the foreign insolvency laws and other relevant laws such as local property laws?

In the case of Videocon, while the NCLT ordered for consolidation of assets of Indian companies and foreign companies based on certain parameters, the NCLT should have also regarded the foreign laws where the foreign companies are operating and/ or are incorporated, more specifically, the insolvency regime of the country where the foreign companies are incorporated and the local property laws therein. Also, until the advent of the cross border insolvency framework, enforcing the provisions of IBC outside India may be a huge challenge.

Our write-ups/ presentation on related topics can be accessed from the link below:

• Entity versus Enterprise: Dealing with Insolvency of Corporate Groups ;
• Group Insolvency: Moving from “Entity” to “Enterprise” ;
• Proposed Group Insolvency Framework in India .

[1] https://www.uncitral.org/pdf/english/texts/insolven/Leg-Guide-Insol-Part3-ebook-E.pdf

[2] https://nclt.gov.in/sites/default/files/Feb-final-orders-pdf/State%20Bank%20of%20India%20MA%202385%20of%202020%20in%20CP%28IB%29-02_2018%20NCLT%20ON%2012.02.2020%20FINAL.pdf

[3] https://nclt.gov.in/sites/default/files/final-orders-pdf/VIDEOCON%20INDUSTRIES%20LTD.%20MA%201306%20OF%202018%20%20CP%2002%20-%202018%20NCLT%20ON%2008.08.2019%20FINAL.pdf

[4] https://ibbi.gov.in/uploads/resources/d2b41342411e65d9558a8c0d8bb6c666.pdf

[6] https://www.leagle.com/decision/inbco20150417770

[7] https://www.courtlistener.com/opinion/2191742/in-re-logistics-information-systems-inc/

[8] https://www.leagle.com/decision/inbco20161215822

[9] https://casetext.com/case/in-re-genesis-health-ventures-inc-2

[10] https://www.leagle.com/decision/2005614419f3d1951594

[11] https://casetext.com/case/in-re-bonham

[12] https://www.casemine.com/judgement/us/591484f2add7b049344bed92

[13] https://openjurist.org/810/f2d/270/auto-train-corporation-inc-drabkin-v-midland-ross-corporation

[14] https://www.casemine.com/judgement/us/5914bf94add7b049347aecbd

[15] https://www.courtlistener.com/opinion/1526771/in-re-murray-industries-inc/

[16] https://casetext.com/case/in-re-bonham

[17] https://www.govinfo.gov/content/pkg/USCOURTS-flsb-1_10-ap-03311/pdf/USCOURTS-flsb-1_10-ap-03311-0.pdf

[18] https://law.justia.com/cases/federal/district-courts/BR/263/510/1915157/

[19] https://casetext.com/case/in-re-bonham

[20] https://law.justia.com/cases/federal/appellate-courts/F2/954/1/128260/

[21] See Also: In Re Augie/Restivo Baking Co., 860 F.2d 515, 519 (2d Cir. 1988); In Re R.H.N. Realty Corp., 84 B.R. 356, 358 (Bankr.S.D.N.Y. 1988); In Re Blum, 49 B.R. 422, 427 n. 1 (Bankr.W.D. Mo. 1985)

[22] See Also: In Re Evans Temple Church of God in Christ & Community Ctr., Inc., 55 B.R. 976, 981 (Bankr.N.D. Ohio 1986)

[23] https://www.courtlistener.com/opinion/1830558/in-re-amereco-environmental-services-inc/

[24] https://www.casemine.com/judgement/us/59148e73add7b04934554391

[25] https://www.casemine.com/judgement/us/5914c336add7b049347c4c1f

[26] https://www.courtlistener.com/opinion/1848254/in-re-snider-bros-inc/?

[27] https://www.casemine.com/judgement/us/59149298add7b0493459af84

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ICICI v. Videocon case analysis

This article is written by Anaya Jain , from NMIMS school of law, Bangalore. This is an exhaustive article in which case analysis of money laundering case of ICICI Bank v Videocon is done.

Table of Contents

Introduction

The ICICI Bank-Videocon case is about allegations of a quid-pro-quo deal between the Kochhars and the Videocon group. The head of the ICICI bank was Kochhar’s. The case rotates around a loan given by ICICI Bank to the Videocon group as a part of a State Bank of India (SBI) led consortium in 2012 and the change of ownership in a firm called NuPower Renewables Pvt Ltd, which was floated as an equivalent joint venture between Chanda Kochhar’s husband Deepak Kochhar and Videocon’s Venugopal Dhoot.

Central Bureau of Investigation filed an FIR against Ms Chanda Kochhar, her better half Deepak Kochhar, leader of the Videocon group Venugopal Dhoot and ICICI Bank officials for sanction of credit facilities infringing upon rules, that caused a loss of ₹1,730 crores to the ICICI bank. 

The investigating agency till 2nd February 2019 can’t seem to establish whether the loans were given in return for financial favours, a charge that is at the core of booking them for criminal conspiracy, cheating and corruption.

Kochhar committed the mistake of not revealing to the bank’s board about her husband other’s business associations with the Videocon group, which was a customer of the bank. 

She kept on being a part of the advisory groups that sanctioned credit facilities to Videocon when she should have separated herself on-premise of conflict of interest. 

The CBI inquiry report holds her responsible for violation of the bank’s “code of conduct, its system for dealing with conflict of interest and fiduciary duties, and the relevant Indian laws, rules, and guidelines.”

In spite of the fact that ICICI bank’s board has acknowledged the report , additionally choosing to pull back all bonuses paid to her since April 2009 and so forth however the board gave her a clean chit as of late as March a year ago. 

It is difficult to accept that the board didn’t know about these turns of events, as an informant had made these allegations public in October 2016, yet at the same time, the board gave a clean chit to her. 

Timeline of the facts

October 2016 – After an investor informant Arvind Gupta, an investor in both ICICI Bank and Videocon Group, raised questions via a blog, the topic of suspected loan irregularities comes to light. Gupta affirms that Chanda Kochhar influenced the Venugopal Dhoot-led Videocon group’s Rs 3,250-crore loan in 2012 in exchange for a contract with NuPower Renewables and Supreme Energy, a renewable energy business owned by her husband Deepak Kochhar. Gupta keeps in touch with the Prime Minister, the RBI Governor and a few different authorities requesting a probe. His complaint, however, accumulates no attention. 

March 2018 –  The case again comes in the spotlight when another anonymous informant grumbles against the bank and its top administration, including Kochhar, alleging an intentional delay in recognising hindrance in 31 loan accounts somewhere in the range of 2008 and 2016 to save money on provisioning costs. These charges led to probes by numerous agencies, including the Central Bureau of Investigation (CBI), enforcement directorate (ED) and Serious Fraud Investigation Office (SFIO), and furthermore questioning of Kochhar relatives. 

March 28, 2018 –  The bank expresses that it has reviewed internal procedures for credit approval and ‘found them to be strong’. The statement points out that the decision to give loan to Videocon Group was taken at the consortium level. Despite the fact that Kochhar was a part of the loaning advisory group that approved the loan, she didn’t have any personal stake in it. The bank’s board additionally communicates full confidence in Kochhar, denying any bad behaviour on her part and precluding any ‘irreconcilable situation’

March 31, 2018 – An initial enquiry is filed by the CBI. Later also, the investigating agency questioned Deepak Kochhar and his sibling Rajiv Kochhar.

April 3, 2018 – Coming to the defence of its CEO Chanda Kochhar, ICICI Bank Chairman M K Sharma said the board has full trust in her and precludes any quid pro quo as alleged in respect of the loan given to Videocon group.

“The board has arrived at the conclusion that there is no doubt of any quid pro quo or compensation/nepotism/conflict of interest as is being asserted in different rumours,” he tells reporters. 

April 4, 2018 – The Serious Fraud Investigation Office (SFIO) is seeking the nod from the Ministry of Corporate Affairs to check the Rs 3,250 crore loan from ICICI Bank to the Videocon group in 2012.

May 23, 2018 –  The Securities and Exchange Board of India (SEBI) shall inform ICICI Bank CEO and MD Chanda Kochhar of the lender’s dealings with the Videocon Group and NuPower Renewables, an organization supported by her friend Deepak Kochhar. The market regulator asked Kochhar and the bank to present their responses till June 7 according to a 12-page show-cause notice it served to ICICI Bank and Kochhar on May 23. 

May 30, 2018 –  An autonomous probe starts at the ICICI Bank board.

June 2018 – The bank appoints retired Supreme Court judge BN Srikrishna to head the independent panel set up by the board of ICICI Bank.

June 8, 2018 – ICICI Bank and Chanda Kochhar are looking for more time to respond to the market regulator SEBI ‘s show-cause notice.

July 5, 2018 – Kochhar is asked by SEBI to answer to the show cause notice over alleged infringement 0f listing disclosure standards by July 10. The deadline of 7th July had been missed by Kochhar and the bank and looked for more opportunity to respond to the notification because of the absence of documentary proof that helped the claims. 

October 4, 2018 –  The ICICI Bank board acknowledges and accepts Chanda Kochhar’s request to seek early retirement. The bank says that the enquiry established by the board will stay unaffected and certain advantages will be dependent upon the result of the enquiry. 

January 24, 2019 – The CBI files an FIR against Chanda Kochhar, her husband Deepak Kochhar, and Videocon group MD Venugopal Dhoot over alleged loan defaults granted to the company by the bank in 2012.

January 30, 2019 – In the Videocon loan case, a panel headed by Justice BN Srikrishna found that Kochhar infringed the code of conduct of the bank. After the survey, the board of the bank says that it will view her separation as a ”termination for cause’ under their internal policies.

The Enforcement Directorate has enrolled a criminal case of money laundering against past ICICI Bank Chief Executive Officer Chanda Kochhar, her significant other Deepak Kochhar, Videocon Group advertiser Venugopal Dhoot and others to test claimed irregularities and corrupt practices in sanctioning of Rs 1,875 Crore advances or loans by the bank to the corporate groups, said by authorities. They said the central investigation agency documented an Enforcement Case Information Report under the Prevention of Money Laundering Act , taking a notice of a Central Bureau of Investigation’s complaint recorded on the issue a couple of times prior. An ECIR is a thing that could be contrasted with a police FIR.

The accused list in the ED(enforcement directorate) case is equal to that of the CBI. The CBI had named Chanda Kochhar, Deepak Kochhar, and Dhoot and his organizations  Videocon International Electronics Ltd and Videocon Industries Ltd in the list. The list in the ED case has additionally been named Supreme Energy, a company established by Dhoot, and Nupower Renewables, a company controlled by Deepak Kochhar, in the FIR.

The Central Bureau of Investigation on Jan. 22, 2019 filed a first information report against ICICI Bank Ltd’s. former managing director and CEO, Chanda Kochhar, her better half that is Deepak Kochhar and VN Dhoot who is a managing director of Videocon Industries Ltd. over alleged inconsistencies in transactions between the lender and private entities. 

The FIR details the loan exchanges between ICICI Bank and companies related to the Videocon Group. It begins with giving the timeline over which companies engaged with the exchanges were set-up. The CBI at that point proceeds to clarify the loan transactions, including one which builds up the alleged quid pro quo between Chanda Kochhar, Deepak Kochhar and Venugopal Dhoot and their companies. 

The entities involved 

On July 3 2008, Supreme Energy Pvt Ltd. was incorporated, and the first directors were VN Dhoot (9990 shares) and Vasant Kakade (10 shares). 

On Jan. 15 2009, To the Pinnacle Energy Trust, managed by Deepak Kochhar. Between this time, Nupower Renewables was founded on 24 December 2008 and the company’s first directors were Deepak Kochhar, VN Dhoot and Saurabh Dhoot.

On Jan. 15, 2009 – Out of Nupower VN Dhoot and Saurabh Dhoot resigned. Prior to departure, V.N. Dhoot issued Deepak Kochhar 19,97,500 warrants at the rate of Rs 10 for each warrant, on an initial payment of Rs 11 for each warrant. 

On June 5, 2009, 24,996 shares of Nupower Renewables held by VN Dhoot and Deepak Kochhar group (Pacific Capital Services Pvt Ltd) were moved to Supreme Energy Pvt Ltd., which transformed into Nupower Renewables’ 95 per cent shareholder.

The loan transactions 

The loan transactions detailed took place from June 2009 till October 2011. Chanda Kochhar took over as CEO of ICICI Bank on May 1, 2009. As indicated by the FIR, six “high value” loans to different Videocon Group companies were given during this period. 

On June 30 2009, a rupee term loan of Rs 175 crore was sanctioned to Millennium Appliances India Ltd – a Videocon Group company. 

On August 26 2009, Videocon International Electronics Ltd received a Rs 300 Crore loan. The CBI said this was in contravention of the standards and policy by the sanctioning committee however didn’t specify which rules were violated. 

On November 17, 2010, Rs 240 crore was sanctioned to Sky Appliances Ltd. 

On November 17, 2010, Rs 110 crore was sanctioned to Techno Electronics Ltd. 

On May 30, 2011, Rs 300 crore loan was sanctioned to Applicomp India Ltd. 

On October 31, 2011, Rs 750 crore loan was sanctioned to Videocon Industries. 

According to the FIR, the loans sanctioned to Sky Appliances, Techno Electronics and Applicomp India were to empower them to reimburse the unsecured loan availed by these organizations from Videocon Industries. Further, a loan was additionally sanctioned to Videocon Industries for refinancing the current loans of the organization.

Such loans have converted NPA (non-performing assets) into unfair losses for ICICI Bank and unfair profits for lenders and accused individuals.

The alleged quid pro quo 

The supposed remuneration or alleged quid pro quo, detailed by the CBI, is on account of the Rs 300 crore loan given on Aug.26, 2009 to Videocon International Electronics Ltd (VIEL). Chanda Kochhar was one of the individuals from the sanctioning committee. 

• On September 7, 2009, this loan was dispensed to VIEL. 
• On the following day, September 8, 2009, VN Dhoot transferred Rs 64 crore to Nupower Renewables, managed by Deepak Kochhar. 
• The loan was transferred to Nupower Renewables from Videocon Industries, through Supreme Energy. 
• This, as per the CBI, was the first major capital received by Nupower Renewables to get its first power plant.

Consequently, through her significant other half from Videocon Industries Ltd/VN Dhoot, Chanda Kochhar got unlawful gratification/undue preferred position for endorsing Rupee Term Loan of Rs 300 Crore to VIEL. 

FIR against Chanda Kochhar – what the CBI alleges

The CBI has slapped sections of the Indian Penal Code relating to criminal conspiracy, cheating and the Prevention of Corruption Act provisions on all accused persons. It had also carried out raids in the event. Dhoot is alleged to have invested in the Nupower organization of Deepak Kochhar through his company Supreme Energy, a compensation or quid pro quo for loans cleared by ICICI Bank following Chanda Kochhar took over as the CEO of the bank on May 1, 2009. 

Nupower and Supreme Energy’s ownership has changed hands through an intricate trap of shared exchanges between Deepak Kochhar and Dhoot, the CBI claimed.

During its preliminary inquiry, the CBI found that six loans worth Rs 1,875 crore were issued between June 2009 and October 2011 to the Videocon Group and its related companies in alleged violation of ICICI Bank ‘s policies, which had then become part of the investigation. 

In 2012, the loans were declared non-performing assets which caused the bank to lose Rs 1,730 crore, alleged CBI.

This case raises questions over the guidelines of corporate administration at one of India’s biggest banks. The ICICI Bank scene is just one among a few examples of governance lapses in corporate India as of late. It highlights the need for regulators to keep up a severe vigil on the functions of corporate boards in a period of corporate misadministration.

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Decoding ICICI-Videocon loan fraud case in which Chanda Kochhar was arrested

Having joined the private bank as a management trainee in 1984, chanda kochhar rose to become the first woman to head a large bank in the country in 2009, having succeeded the then group chairman kv kamath..

Chanda Kochhar, the beleaguered former chief executive officer of ICICI Bank and her husband Deepak, have been granted bail by the Bombay high court in the mulit-crore bank loan fraud case. The court said the couple's arrest was not in accordance with law. Kochhar and her husband were arrested on December 23 by the Central Bureau Investigation (CBI) over alleged quid pro quo also involving Videocon Group founder Venugopal Dhoot. Having joined the private bank as a management trainee in 1984, Chanda Kochhar rose to become the first woman to head a large bank in the country in 2009, having succeeded the then group chairman KV Kamath. However, her fall from grace was attributed to allegations of conflict of interest and quid pro quo due to deals between Dhoot and her husband. Here's what you need to know about this high-profile case involving one of the leading bankers of the country. 1. The CBI alleged that the ICICI Bank granted rupee term loans worth ₹ 1,875 crore to six Videocon Group companies between 2009 and 2011 soon after Chanda Kochhar took over as the managing director and chief executive officer.

2. On September 7, 2009, a loan worth ₹ 300 crore was allegedly approved to Videocon International Electronics Limited with Kochhar as the head of the sanctions committee. 3. Out of this, the Videocon Group allegedly transferred ₹ 64 crore to NuPower Renewables, the company which was managed by Deepak Kochhar.

4. In its FIR registered in 2019, the CBI had named Chanda Kochhar, Deepak Kochhar, Videocon Group founder Venugopal Dhoot, Nupower Renewables (managed by Deepak Kochhar), Supreme Energy, Videocon International Electronics Ltd and Videocon Industries Ltd as accused. 2. The central agency claimed ICICI Bank sanctioned loans worth ₹ 3,250 crore to these companies. Dhoot is said to have invested ₹ 64 crore in Deepak Kochhar-managed Nupower through Supreme Energy Private Limited, and transferred the company to Pinnacle Energy Trust which was again managed by Chanda Kochhar's husband. 3. As per the probe agency, the ICICI Bank granted loans worth ₹ 1,875 crore to six firms of the Videocon Group between June 2009 and October 2011 after Kochhar took over as MD and CEO. 4. A loan worth ₹ 300 crore was allegedly sanctioned to Videocon International Electronics Limited when Kochhar was heading the sanctions committee. 5. After the loan was disbursed on September 7, 2009, the Videocon Group through its firm Supreme Energy transferred ₹ 64 crore to Deepak Kochhar's NuPower Renewables.

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A case study on Videocon Group of Advances

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Videocon gets Rs 3250-cr loan from ICICI Bank, bank CEO’s husband gets sweet deal from Venugopal Dhoot

Promoter Venugopal Dhoot forms JV with Chanda Kochhar’s husband, loans Rs 64 crore, then hands him ownership of lending entity for Rs 9 lakh; ICICI Bank declares Videocon account NPA.

In December 2008,  Venugopal Dhoot  of the Videocon Group set up a company with Deepak Kochhar, husband of ICICI Bank MD and CEO  Chanda Kochhar , and two of her relatives; then gave a Rs 64-crore loan to this company through a fully owned entity before he transferred the latter’s ownership to a trust headed by Deepak Kochhar for just Rs 9 lakh, an investigation by The Indian Express has found.

In what raises questions of propriety and conflict of interest, the transfer of the company to Deepak Kochchar happened six months after the Videocon Group got a loan of Rs 3,250 crore from ICICI Bank. Almost 86 per cent of that loan (Rs 2,810 crore) remains unpaid and Videocon account was declared an NPA in 2017.  Sources have confirmed to The Indian Express that the Dhoot-Kochhar-ICICI web of transactions is being examined by investigative agencies.

A day after The Indian Express sent a detailed questionnaire to ICICI Bank for its response to its findings, ICICI Bank issued a press release Wednesday evening saying “there is no question of any quid pro quo/nepotism/conflict of interest as is being alleged in various rumours.” It said the Board “reposes full faith” in Chanda Kochchar and added that “malicious and unfounded rumours” were being spread to “malign the Bank.”

The statement, however, did not address the specific query from The Indian Express on Deepak Kochchar-Venugopal Dhoot transactions or the conflict of interest.

Consider the sequence of events and transactions, as per records investigated by The Indian Express:

• In December 2008, Deepak Kochhar and Venugopal Dhoot set up NuPower Renewables Pvt Ltd (NRPL). Dhoot held 50 per cent stake in the company with his family members and associates. Deepak Kochhar and Pacific Capital owned by Deepak Kochhar’s father and Chanda Kochhar’s brother’s wife held the remaining 50 per cent.
• In January 2009, Dhoot resigned as director of NuPower and transferred his 24,999 shares in the company to Kochhar for Rs 2.5 lakh.
• In March 2010, NuPower got a loan of Rs 64 crore (as fully convertible debenture) from a company called Supreme Energy Private Limited which was 99.9 per cent owned by Dhoot.
• Following a sequence of transfer of shares from Dhoot to Kochhar and then from Kochhar and his relatives’ Pacific Capital to Supreme Energy, Supreme Energy became a 94.99 per cent shareholder in NuPower by the end of March 2010. Kochhar held the remaining 4.99 per cent stake in NuPower at the time.
• In November 2010, Dhoot transferred his entire holding in Supreme Energy, to his associate Mahesh Chandra Punglia.
• Beginning September 29, 2012 to April 29, 2013, Punglia transferred his holding to Pinnacle Energy, a trust, where Deepak Kochhar was the managing trustee. The total transaction value of the complete transfer of shares from Punglia to Kochhar’s Pinnacle Energy trust: Rs 9 lakh.

CONSEQUENCES:

• In effect, Supreme Energy gave a loan of Rs 64 crore to NuPower and then got subsumed by Pinnacle Energy within three years.
• ICICI Bank did not respond to queries sent by The Indian Express on these financial transactions, share transfers between Dhoot/Videocon companies and companies run by Deepak Kochhar, and on the issue of conflict of interest.
• But on the issue of loan granted to Videocon Group, the bank said: “In 2012, a consortium of over 20 banks and FIs where State Bank of India was the facility agent (Lead) sanctioned facilities to the Videocon group (Videocon Industries Ltd. and 12 of its subsidiaries/ associates as co-obligors) for a debt consolidation programme and for the group’s oil and gas capital expenditure programme aggregating approximately Rs. 40,000 crore…ICICI Bank sanctioned its share of facilities aggregating approximately Rs 3250 crore which was less than 10% of the total consortium facility in April 2012.”
• It further said “The current outstanding against this loan is Rs 2810 crore and total current exposure to Videocon group is Rs 2849 crore…The Videocon group account has been classified as an NPA during 2017.”
• When contacted, Venugopal Dhoot said, “On January 15, 2009, I resigned as a director of NuPower Renewables and Supreme Energy Private Ltd and sold at par the 24,996 shares of NuPower and 9,990 shares of Supreme Energy held by me, thereby relinquishing my right, title and interests in the said shares, giving up control and management of Supreme Energy and completely disassociating myself from both the Companies all on the same day, as I got too busy with my other larger business like oil & gas, telecommunication, etc.”
• NuPower stated the same in its response to the email sent by The Indian Express.
• However, Registrar of Companies filings of Supreme Energy show that Dhoot owned it until October 2010 and then transferred his share holding to Punglia in November 2010.
• Nupower also said that it has no concern or connection with ICICI Bank’s lending to companies owned by Venugopal Dhoot.
• On the question of conflict of interest, a spokesperson for NuPower said: “There is no conflict of interest whatsoever and the above transactions have nothing to do with any loans processed by ICICI Bank. Pinnacle Energy trust and Supreme Energy have no business relationship with ICICI Bank.”
• As of March 2017, for which latest RoC records are available, Deepak Kochhar held an aggregate of 43.4 per cent in NuPower both as direct holding and through Supreme Energy and Pinnacle Energy.
• The remaining holding is with Mauritius-based DH Renewables. As of March 31, 2016, Kochhar along with Supreme Energy and Pinnacle Energy held 96.23 per cent.
• While the company came into existence in December 2008, it announced net losses in last six financial years. In the six years from FY’12 to FY’17, the accumulated losses for NuPower amounted to Rs 78 crore. In FY’17 it posted a loss of Rs 14.3 crore.

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Embracing Gen AI at Work

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The skills you need to succeed in the era of large language models

Today artificial intelligence can be harnessed by nearly anyone, using commands in everyday language instead of code. Soon it will transform more than 40% of all work activity, according to the authors’ research. In this new era of collaboration between humans and machines, the ability to leverage AI effectively will be critical to your professional success.

This article describes the three kinds of “fusion skills” you need to get the best results from gen AI. Intelligent interrogation involves instructing large language models to perform in ways that generate better outcomes—by, say, breaking processes down into steps or visualizing multiple potential paths to a solution. Judgment integration is about incorporating expert and ethical human discernment to make AI’s output more trustworthy, reliable, and accurate. It entails augmenting a model’s training sources with authoritative knowledge bases when necessary, keeping biases out of prompts, ensuring the privacy of any data used by the models, and scrutinizing suspect output. With reciprocal apprenticing, you tailor gen AI to your company’s specific business context by including rich organizational data and know-how into the commands you give it. As you become better at doing that, you yourself learn how to train the AI to tackle more-sophisticated challenges.

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Generative artificial intelligence is expected to radically transform all kinds of jobs over the next few years. No longer the exclusive purview of technologists, AI can now be put to work by nearly anyone, using commands in everyday language instead of code. According to our research, most business functions and more than 40% of all U.S. work activity can be augmented, automated, or reinvented with gen AI. The changes are expected to have the largest impact on the legal, banking, insurance, and capital-market sectors—followed by retail, travel, health, and energy.

• H. James Wilson is the global managing director of technology research and thought leadership at Accenture Research. He is the coauthor, with Paul R. Daugherty, of Human + Machine: Reimagining Work in the Age of AI, New and Expanded Edition (HBR Press, 2024). hjameswilson
• Paul R. Daugherty is Accenture’s chief technology and innovation officer. He is the coauthor, with H. James Wilson, of Human + Machine: Reimagining Work in the Age of AI, New and Expanded Edition (HBR Press, 2024). pauldaugh

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