Promoters within their rights to submit bids in IBC cases, says SBI’S Rajnish Kumar
MUMBAI: Promoters are within their rights to submit bids in the process of resolution of stressed assets under the Insolvency & Bankruptcy Code (IBC), State Bank of India chairman Rajnish Kumar said on Monday.
“Ethical... I don’t know, but legally they are within their rights to participate. I am not concerned about that because even if it is existing promoters, there will be few pre-conditions from the creditors’ side,” Kumar said on the sidelines of a banking conclave in Mumbai.
The first pre-condition is that the promoters should not be wilful defaulters and secondly, a forensic audit should clear them of any wrong-doing, Kumar said. The quality of the resolution plan they submit also matters.
Following a RBI directive in June, banks have referred 12 large corporate accounts for bankruptcy resolution proceedings to the National Company Law Tribunal, the adjudicating body under the IBC. In 11 cases, petitions have been accepted and interim resolution professional (IRPS), who take management control of the defaulting firm, have been appointed. Most IRPS have sought bids from interested buyers.
Kumar’s comments come at a time when some experts have expressed concern over promotwrote ers of defaulting companies trying to regain control of these entities. This is because banks feared that promoters re-gaining control of a firm may raise doubts on the credibility of the process.
According to Ramesh K. Vaidyanathan, managing partner of the law firm Advaya Legal, in cases where promoters submit a resolution plan, the NCLT will have to be convinced that the plan is the best option and it makes commercial sense.
As far as legality is concerned, there is no prohibition on promoters participating in the bidding process subject to the condition that there has been no misconduct or fraud on their part.
Essar Group has submitted an expression of interest for Essar Steel Ltd, one of the 12 cases referred to the NCLT, PTI reported on October 29.
The ministry of corporate affairs is also planning several changes to IBC, The Economic Times reported on November 4.