DNA Money Edit: When old promoters bid at NCLT

When banks are trying to sell off assets owned by the distressed companies currently referred to the National Company Law Tribunal (NCLT), adequate care should be taken to see that the old promoters making a comeback should be bound by strict turnaround plans. The government should not let domestic banks subsidise the inefficiencies of the companies who have loaned crores of public money to them.

On November 8, the Insolvency and Bankruptcy Board of India (IBBI) amended its regulations so that lenders undertake a thorough check of the background and creditworthiness of the bidders. The fear was that the same promoters may bid at lower prices and the company would remain in their own control defeating the purpose of the NCLT. Bankers, including the State Bank of India (SBI) chairman Rajnish Kumar, say there is nothing wrong if the existing promoters bid, provided they meet the creditors’ conditions, and a forensic audit is conducted. Essar Group, for instance, had submitted an expression of interest for Essar Steel, one among the 12 cases.

Ideally, bankers should make it a pre-condition for debts of the group companies to be repaid when some other assets of the same promoter are getting sold.