Pro­mot­ers within rights to sub­mit bids in in­sol­vency cases: SBI’S Ku­mar

Mint Asia ST - - News - BAY LEKH A RCHANA

Pro­mot­ers

are within their rights to sub­mit bids in the process of res­o­lu­tion of stressed as­sets un­der the In­sol­vency and Bank­ruptcy Code (IBC), State Bank of In­dia chair­man Ra­jnish Ku­mar said on Mon­day, 6 Novem­ber.

“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. Lastly, the qual­ity of the res­o­lu­tion plan they sub­mit also mat­ters.

Fol­low­ing a Re­serve Bank of In­dia di­rec­tive in June, banks have re­ferred 12 large cor­po­rate ac­counts for bank­ruptcy res­o­lu­tion pro­ceed­ings to the Na­tional Com­pany Law Tri­bunal (NCLT), the ad­ju­di­cat­ing body un­der the IBC.

In 11 such cases, pe­ti­tions have been ac­cepted and in­terim res­o­lu­tion pro­fes­sional (IRPS), who take man­age­ment con­trol of the de­fault­ing com­pany, have been ap­pointed. Most IRPS have sought bids from in­ter­ested buy­ers to draw a res­o­lu­tion plan.

Ku­mar’s com­ments come at a time when some in­dus­try ex­perts have ex­pressed con­cern over pro­mot­ers 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 29 Oc­to­ber.

The min­istry of cor­po­rate af­fairs is plan­ning sev­eral changes to IBC, one of which is to en­sure that failed pro­mot­ers don’t re-gain con­trol of the com­pany, The Eco­nomic Times re­ported on 4 Novem­ber.

“The idea will be to en­hance the en­ter­prise value and any­body who give the max­i­mum en­ter­prise value, which will be in the in­ter­est of the en­ter­prise, lenders and the coun­try as whole,” Ku­mar said.

Sep­a­rately, Ku­mar also said that the pro­cesses as pre­scribed by the IBC are run­ning as per time­lines, and there has been con­sid­er­able in­ter­est from prospec­tive buy­ers, es­pe­cially for as­sets in the steel sec­tor.

Res­o­lu­tion process: State Bank of In­dia chair­man Ra­jnish Ku­mar.

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