Subsidiary Assets Cannot Form Part of Parent Company CIRP: NCLAT Delhi's Landmark Ruling in the Videocon Oil and Gas Assets Dispute

Background and Overview

The National Company Law Appellate Tribunal (NCLAT), Delhi Bench, delivered a significant ruling addressing six consolidated appeals arising from orders dated 12.02.2020 and 26.06.2024, which revolved around a critical question in insolvency law: whether foreign oil and gas assets held through subsidiary entities could be drawn into the Corporate Insolvency Resolution Process (CIRP) of a parent corporate debtor.

The case — State Bank of India Vs Venugopal Dhoot — emerged from the prolonged insolvency proceedings involving Videocon Industries Ltd. (VIL) and its associated group companies. The central controversy was whether assets held through foreign entities — specifically Videocon Oil Venture Ltd. (VOVL), Videocon Hydrocarbon Holdings Ltd., Videocon Energy Brasil Ltd., and Videocon Indonesia Nunukan Inc. — could be treated as assets of Videocon Industries Ltd. and included in its Information Memorandum for CIRP purposes.

The four appeals bearing numbers Company Appeal (AT)(Ins) No. 299/2020, 467/2020, 639/2020, and 640/2020 challenged the NCLT Mumbai's order dated 12.02.2020, which had allowed the application filed by Mr. Venugopal Dhoot directing the Resolution Professional to include foreign assets within the CIRP of VIL. Two further appeals — Company Appeal (AT)(Ins) No. 1442/2024 and 1623/2024 — were directed against the order dated 26.06.2024 approving the transaction with BPRL Ventures B.V. in the CIRP of VOVL.

Parties and Appeals at a Glance

The six appeals were filed by different parties pursuing distinct but interconnected grievances:

  • Comp. App. (AT)(Ins) No. 299 of 2020 — State Bank of India v. Venugopal Dhoot & Ors. (comprehensive appeal covering all foreign assets)
  • Comp. App. (AT)(Ins) No. 467 of 2020 — Pertamina Hulu Energi Nunukan Company v. Venugopal Dhoot & Ors. (Brazilian oil and gas assets)
  • Comp. App. (AT)(Ins) No. 639 of 2020 — BPRL Ventures Indonesia B.V. & Anr. v. Venugopal Dhoot & Ors. (Indonesian oil and gas assets)
  • Comp. App. (AT)(Ins) No. 640 of 2020 — BPRL Ventures Indonesia B.V. & Anr. v. Venugopal Dhoot & Ors. (Indonesian oil and gas assets)
  • Company Appeal (AT)(Ins) No. 1442/2024 — Filed by Mr. Dhoot against NCLT order dated 26.06.2024
  • Company Appeal (AT)(Ins) No. 1623/2024 — Filed by Mr. Dhoot against NCLT order dated 26.06.2024

Key Legal Issue: Whether any foreign oil and gas assets could be included in the CIRP of Videocon Industries Ltd. and its 12 associated group companies.

Factual Matrix: How the Dispute Arose

Original Financing Structure

During 2012 and the subsequent years, VOVL and VIL jointly availed financing on an obligor/co-obligor basis through standby letters of credit under two agreements:

  1. LOC/SBLC Facility Agreement dated September 27, 2012 (Tranche 1 Facility)
  2. Tranche 2 LOC/SBLC Facility Agreement dated 1st September, 2015

These facilities were extended by a consortium of lenders led by State Bank of India, which held a first-ranking security interest over the assets of the borrowing entities.

Mr. Dhoot's Own Request to Ring-Fence Foreign Assets

A pivotal development in the factual narrative was that Mr. V.N. Dhoot himself, in 2016–17, approached the lending consortium requesting that VIL be removed as co-obligor and instead be restructured as a corporate guarantor. The rationale provided by Mr. Dhoot in his letter dated 21.11.2016 was explicit:

"The Group is facing stress in domestic debt servicing on account of insufficient cash flows from the domestic business VIL. Therefore, in order to protect the oil and gas assets of the group from the financial stress being experienced by VIL in the domestic business, it is essential to shift the SBLC Facility from VIL and VOVL on Obligor/Co-Obligor Basis to VOVL. Accordingly, VIL shall be released as co-obligor from the SBLC Facility, while VOVL shall continue as the Borrower of the SBLC Facility..."

A similar request was reiterated on January 17, 2017. Consequently, on March 30, 2017, the facility agreements were formally amended, with VIL executing an irrevocable and unconditional corporate guarantee in respect of VOVL's debts and liabilities.

This conscious restructuring — requested by Mr. Dhoot himself — was intended precisely to segregate the foreign oil and gas assets from the domestic business stress. This fact would later become central to the NCLAT's analysis.

Initiation of CIRP and Subsequent Developments

On 06.06.2018, SBI filed an application under Section 7 of the Insolvency and Bankruptcy Code against VIL, which was admitted by the NCLT Mumbai Bench, triggering the CIRP of Videocon Industries Ltd.

Following this: