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Orchid Pharma’s promoter firm too goes under resolution process

Sajan C Kumar
Orchid Pharma, NCLT, IDBI Bank, Laksmi Vilas Bank, Ingen Capital Group , Piramal Capital

The Chennai bench of the National Company Law Tribunal (NCLT) has ordered commencement of corporate insolvency resolution process (CIRP) against Orchid Healthcare Private, a promoter group company of Orchid Pharma, which is under resolution process and is in the process of scouting for suitors.

The NCLT ordered CIRP against Orchid Healthcare on a petition filed by IDBI Bank, which pointed out the company (corporate debtor) defaulted in repaying the loan amount of Rs 215.74 crore availed by Orchid Pharma (principal borrower) as on July 1, 2018, despite the corporate guarantee being invoked against the corporate debtor.

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According to the NCLT order, Orchid Pharma availed loan of Rs 191.24 crore for which the corporate debtor stood as guarantor. Since the principal borrower had not paid the loan amount and gone under CIRP, the IDBI Bank has initiated the proceedings. Considering the request of the bank, and noting that there had been no objection from the company, the NCLT bench of BSV Prakash Kumar, member (judicial), S Vijayaraghavan, member (technical), ordered initiation of CIRP and appointed an interim resolution professional.

Orchid Healthcare has 22.64 % stake in Orchid Pharma, and is the major shareholder in the promoter group, as on December 31, 2018, according to BSE. Orchid had a total debt of around Rs 3,200 crore from a slew of banks. Orchid Pharma, which has been into manufacturing, marketing and research of pharmaceutical products, had been under financial stress for a few years now and the NCLT had ordered CIRP with effect from August 17, 2017 on a petition filed by an operational creditor, Laksmi Vilas Bank.

It may be recalled that the resolution professional of Orchid Pharma had called for fresh expressions of interest (EoIs) from potential investors for submitting resolution plan for the company, following Chennai NCLT annulling the approved resolution plan of US-based lngen Capital Group and ordering fresh corporate insolvency resolution process.

The RP had informed NCLT that companies such as Divis Laboratories, Gland Celsus Biochemicals and Fidelity Trading, ART Capital, Everstone Group, Aion Capital, Piramal Capital and Finquest group have expressed interest in proposing resolution plans for Orchid Pharma.

The NCLT declared invalid the approved resolution plan by Ingen as the company had failed to bring in the promised money even after the stipulated time and despite the bench giving it an option to pay one third of the amount to take the proceedings further.

The resolution plan by Ingen Capital Group was approved by the NCLT on September 17, 2018, after the committee of creditors had cleared it. As per the resolution plan, which was for Rs 1,490 crore, Ingen was to infuse Rs 1,060 crore within five days of the plan approval.

When the company failed to pay the amount, the RP moved the NCLT, and on October 10, 2018 when Ingen was asked to deposit the upfront amount into the financial creditors escrow account. Ingen moved the NCLAT against this order. The NCLAT, after hearing the counsel for Ingen, who said it would not be possible to deposit the upfront amount pursuant to the approved resolution plan, ordered issuing of showcause notice to officials of the company.