The Centre has disqualified the winning bidder-consortium Star 9 Mobility, citing “integrity issues,” and annulled the process of strategic disinvestment of helicopter carrier Pawan Hans (PHL), reflecting many a slip between cup and lip in its efforts to privatise state-run firms. This was the second “strategic disinvestment” process to have been repealed in the last two years after the winning bidder was identified.
In September 2022, the government terminated the sale of its 100% stake in Central Electronics (CEL) and disqualified the successful bidder Nandlal Finance and Leasing Private, again due to certain allegations against the firm and the bidding process.
In May last year, the Centre also called off the sale process of fuel retailer-cum-refiner BPCL as shortlisted bidders did not put in financial bids owing to changing dynamics in the petroleum sector and lack of enough pricing freedom for state-run fuel retailers.
These strategic sale processes have come unstuck, even as the very few cases of privatisation has actually been kick-started in recent years, even as a new public sector enterprises policy envisages government to exit most businesses, while maintaining a minimal presence in select “strategic” sectors.
“After careful consideration of the response of the successful bidder to the show cause notice, with the approval of the alternative mechanism comprising the minister of road transport & highways, minister of finance and minister of civil aviation… has decided that successful bidding consortium Star 9 Mobility is disqualified from the process of strategic disinvestment of Pawan Hans in terms of provisions of PIM (preliminary information memorandum) and RFP (request for proposal),” the Department of Investment and Public Asset Management (DIPAM) said on Monday.
Star9 Mobility, a consortium led by Almas Global Opportunity Fund, had won the bid by quoting `211 crore for the government’s 51% stake in loss-making PHL. On April 29, an empowered ministerial panel approved the winning bid by Star9. State-run ONGC owns a 49% stake in the firm, which has an ageing fleet of helicopters.
However, on April 20, the Kolkata bench of the National Company Law Tribunal (NCLT) passed an order against Almas Global for failing to honour its winning bid to acquire EMC, a Kolkata-based power system solutions company. NCLT had sought action against the management of the Almas under section 74(3) of the Bankruptcy Code that could land the officials of the company in jail for 1-5 years. According to the order, Almas Global had failed to pay around `568 crore to EMC’s creditors under the resolution plan that it had proposed, and which had been accepted, taking “the process for a ride.” Following the development, the government had put on hold issuing a letter of award to the consortium.
Meanwhile, the consortium member concerned filed an appeal against the NCLT order in National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi. NCLAT dismissed the appeal, upheld the original order of NCLT, and directed that the NCLT order be forwarded to MCA and IBBI for their consideration on initiating a complaint under sections 74(3) and 236 of the Indian Bankruptcy Code, 2016, DIPAM said.
After consideration, the Insolvency and Bankruptcy Board of India (IBBI) has filed a complaint against the concerned consortium member in the special court. The government examined the adverse orders of NCLT and NCLAT and took note of the complaint filed by IBBI and considered that the adverse orders against a consortium member would lead to the disqualification of the successful bidder under the provisions of PIM and RFP.
According to the government’s strategic disinvestment guidelines: “Any chargesheet by any governmental authority/conviction by a court of law for an offence committed by the interested bidder or any of the members of the consortium or by any of their respective sister concerns or any of their promoters, promoter group and directors would result in disqualification.”
In December 2021, the opposition Congress party had alleged undervaluation of CEL and opposed it being sold to a firm (for Rs 210 crore) which has “no domain experience”. CEL, under the ministry of science & technology, works to commercially exploit indigenous technologies developed by national laboratories and R&D institutions in the country. Even though the firm is profitable (Rs 23 crore in FY21), its sales are largely to other state-run entities, seen as a vulnerability in open market conditions.