Moreover, the differences in opinions that are cropping up between benches of the NCLT on late submissions would be negated.
Tata Steel’s Move to appeal the decision of the Delhi bench of the National Company Law Tribunal (NCLT) to ask the Committee of Creditors (CoC) to accommodate the very late bid by Liberty House for Bhushan Power and Steel, is justified. Liberty House had submitted its bid on February 20, well after the deadline of February 8 and this was, not surprisingly, rejected by the resolution professional (RP). While the appellate tribunal’s decision is awaited, it is difficult to understand how the sanctity of a deadline is to be maintained if the tribunals allow late bids to be accepted. The bench is understood to have said a rejection of a bid “shall be on some substantive ground as against flimsy one’. With due respect to the court, it is hard to see how the grounds for rejecting a late bid can be termed flimsy.
As the counsel for Tata Steel have argued, those submitting proposals much later than the others have an unfair advantage since material information would be in the public domain. Since the objective while resolving the cases is to get the best price possible, it might perhaps be worthwhile to try out the kind of bidding India does for telecom, where the top bid on day-one becomes the base price for day-two … This would ensure the best price while ensuring the process would be more transparent, apart from minimising litigation. Moreover, the differences in opinions that are cropping up between benches of the NCLT on late submissions would be negated. The bidding process should begin only after the eligibility of the prospective buyers is established.
In the case of Bhushan Power and Steel, for instance, the Tata offer of Rs 17,000 crore is way better than the Rs 11,000 crore understood to have been made by JSW Steel. Had there been an auction along the lines suggested, by now the winner would have been declared allowing the resolution process to move on. Instead, we have a situation where the process is becoming mired in litigation. Tata Steel’s lawyers are justified in arguing that if any bid—submitted after full knowledge of the details of the earlier bids—is entertained by the creditors, the process is being reduced to a farce.
In fact, in the Binani Cement case, there appears to be some confusion on whether Ultratech Limited had submitted its bid in time—to the resolution professional—as it claims it did. Since the IBC (insolvency and Bankruptcy Code) is still evolving, and a whole lot of changes are expected to be made soon, it might be worth considering a proposal to have two RPs rather than just one. That way the system would become much more transparent than it is currently. Also, all communication between the RP and the lenders—or the CoC—should be made public.