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Resolving Brand Confusion: Uncovering Hidden Threats in a Low-Leveraged CIRP

Ravindra Beleyur

CIRP

Problem faced: The Corporate Debtor was a service provider and also had a B2C business. I was appointed as Resolution Professional of the CD replacing the IRP. When I took charge, I started noticing that anywhere and everywhere it was mentioned the CD being operated by a firm called “A”  and under its brand! I considered it as a big threat to the resolution process; moreover, “A” was not adding any value to the CD as such.

 

How it was resolved?: We enquired with the IRP whether she has found any arrangement/agreement between the CD and “A”. She shared that she had not found any; enquired with the promoter directors ( foreign investors and away from the country always) about this and they also responded that they were not aware. We were not able to find any legal document to support this arrangement neither for operating by them nor for using their brand. We took out a public notice regarding the matter and removed “A’s” name from all the places possible and letters were also issued to the partners/owners of “A”not to enter the premises of the CD (not only for this reason; but, also for some other valid reasons – who in someways were sabotaging the process). This also ended up in a successful resolution resulting in 100% payment towards all the admitted claims and also payment to all the shareholders (they had brought in +/- Rs. 120 crores!; they got +/- Rs. 50 crores. – This is an unusual scenario of low-leveraged CD! Borrowing was far less than the equity!– ideally, it should not have ended up in a CIRP! (some wrong advice must have resulted in ending up in a CIRP)

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