The Essar-Rosneft deal, newspaper reports suggest, is stuck as LIC wants its loans to be repaid before it gives its nod. Daiichi Sankyo, though not a lender to Fortis Hospital, moved the Delhi High Court to prevent its owners, Malvinder and Shivinder Singh, from selling a stake in it until they paid the money awarded to Daiichi by a Singapore arbitration court. If it is okay for large creditors to prevent a sale till their dues are cleared, the All India Online Vendors Association (AIOVA) seems to be arguing, the same rules must apply to them too.
The association has written to the corporate affairs ministry asking it to halt the sale of Snapdeal to Flipkart till it pays the dues of around 500 sellers. Indeed, AIOVA has demanded that the sale be blocked till 75% of active sellers on Snapdeal’s marketplace do not give their assent. When AskMe shut down, AIOVA had written to commerce minister Nirmala Sitharaman asking for help in getting their dues.
Asking for a 75% consent of active sellers is clearly a no-no, but the vendors do have a point if their dues have not been paid for as long as they claim. Theoretically, the sale of the ailing Snapdeal should make the combined entity stronger, but there is no guarantee it will, nor is there any guarantee the combined entity will clear their payments any faster even though Snapdeal’s debts will automatically flow to it. Besides, the promoters of the companies will be most amenable to pressure now, so this is the best time for the vendors to put pressure.
Subject to setting up a mechanism to ensure the claims being made are genuine, the government would do well to consider mandating that a company cannot change hands till it pays its dues. It is, after all, unfair that promoters of companies get high salaries (the two promoters earned Rs 46 crore each in FY15) while running them into the ground, and even get a golden handshake (reportedly, Rs 100 crore each) for having achieved this distinction, while vendors to whom they owe money have little recourse apart from civil suits that take a long time.
In the event, even though this is incorrect since it is not a personal liability, it is possible those with unpaid dues will file, as in the Stayzilla case, a criminal complaint—this is what led to the CEO and co-founder Vasupal being arrested. While this applies to past dues, given the speed at which the sector is facing bankruptcy, a more viable solution also needs to be found to ensuring regular dues are paid in reasonable time. If the industry doesn’t do this itself, pressure will mount to get the government to act.