|Conflict of interest takes place when an entity is in a position to exploit its official or personal capacity in some way or the other for personal or corporate benefits. There are no guidelines available so far or a code of ethics on the matter yet.|
|According to a report published in the Economic Times on July 4, 2018, a resolution plan for Sharon Bio-Medicine was approved by National Company Law Tribunal (NCLT) bench wherein the lenders were to receive INR 230 Crore against their dues of INR 702 Crore. With such an offer, lenders would have felt happy rather than getting INR 175 Crore through liquidation route.|
However, a closer look at the resolution plan showed that of INR 230 Crore, only INR 10 Crore would be paid upfront, but over a period of 6-8 weeks after all regulatory approvals. The balance INR 220 Crore would be paid over ten years. Further, there would be a moratorium of 12 months over the interest payment and 24 months over principal payment. Thus, lenders would have to swap INR 300 Crore in equity and write off the balance amount.
|For unsecured creditors with exposure of INR 188 Crore, the settlement amount was fixed at INR 184 Crore, although all of it was swapping of debt into equity. The haircut was minimum, and they had an equity upside. Even, in this scenario, 93 percent creditors approved the plan. This was a matter of surprise.|
|In this case, the resolution plan is built in favour of unsecured creditors. This is supported by the fact that FCCB holder Peters Beck and Partner had submitted a resolution plan that was approved. FCCB holders contributed 20 percent to the votes, and they themselves voted in favour of the plan submitted by them.|
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