Defaulting promoters submitting bids for their companies under the insolvency resolution process are “within their rights” to do so, State Bank of India (SBI) chairman Rajnish Kumar said on Monday.
Speaking on the sidelines of Fibac conference here, Kumar said that he was not concerned about it because there will be a few preconditions set by the creditors for resolution plans. “Ethical..I don’t know, but legally they are within their rights to participate,” he said.
He added that firstly, bidders should not be wilful defaulters, secondly, a forensic audit should clear them of any wrongdoing, and finally it will be about the quality of resolution plan submitted.
“The idea will be to enhance the enterprise value and anybody who gives the maximum enterprise value will be in the interest of the enterprise itself, the lenders and the country as a whole,” Kumar explained.
According to him, wilful defaulters or people who have diverted fund, as proved in the forensic audit, will not be allowed to participate. “But otherwise if law permits existing promoters to participate then we can’t help it. It is very much there and we have to abide by the law,” he added.
Meanwhile, news agencies had reported last month that Essar Group submitted an expression of interest (EoI) for Essar Steel, which is among the 12 large defaulters identified by the Reserve Bank of India (RBI) to be resolved under the Insolvency and Bankruptcy Code (IBC). Recent newspaper reports indicated that the government was planning to amend the IBC to ensure that promoters of companies admitted to the National Company Law Tribunal (NCLT) are unable to retain management control.
The RBI, had on June 13, asked banks to refer a dozen troubled companies —with a combined debt of close to Rs 2.4 lakh crore—to the NCLT, following several failed attempts at loan recovery. The 12 accounts, identified by the central bank are those to which banks have an exposure of more than Rs 5,000 crore, more than 60% of which has been recognised as npas. Once cases are admitted to the NCLT, lenders need to set up a committee of creditors (CoC) that will come up with a plan on how the asset will be tackled. If the committee is unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.
Starting January 2018, several committee of creditors will either have to submit a concrete resolution plan to the bankruptcy court or seek a three-month extension since the permissible time of 180 days is set to end.