Promoters have the right to submit bids for group companies which are under stressed assets resolution process under Insolvency & Bankruptcy Code (IBC), according to Rajnish Kumar, chairman, State Bank of India (SBI).
When asked if it is ethical for promoters to buy their group companies which are under the resolution process, he said, "I don't know if there is an ethical issue in this. But legally they are within their rights to participate. I am not concerned about that because even if it is existing promoters there will be a few pre-conditions from the creditors' side." Kumar was speaking on the sidelines of a banking conclave here.
Pre-condition for this kind of bidding should be that the promoters should not be wilful defaulters and forensic audit should also be undertaken to clear them of any wrongdoings, Kumar said. The queries were based on a PTI report of October 29 which said that the Essar Group has submitted an expression of interest for Essar Steel, one among the 12 cases.
Banks have referred 12 large corporate accounts to the National Company Law Tribunal (NCLT). Many of these 11 cases are under various stages of resolutions. Interim resolution professionals have been appointed in most of the cases.
Kumar's statement assumes importance as bankers and other experts have expressed concerns over such action by promoters of defaulting companies.
Some bankers also feel that through this process the same promoters could be regaining control of the companies they drove to losses. Bankers feel that if the same promoters enjoy the haircuts and other benefits of the resolution process then it defeats the purpose of the process.
"The idea will be to enhance the enterprise value and anybody who gives the maximum enterprise value, which will be in the interest of the enterprise, lenders and the country as whole," he said.
When asked about the status of the cases under the IBC, Kumar said the processes as prescribed by the IBC are running as per timelines, and there has been considerable interest from prospective buyers, especially for assets in the steel sector.
Another 28 cases have been pushed to the banks for speedy resolution by RBI. Banks are, however, trying to resolve the cases without going to the NCLT in these cases fearing high provisions and prolonging of cases happening in many cases referred to the tribunal.
BAD-LOAN TANGLE
- Banks have referred 12 large corporate accounts to the NCLT
- Many of these 11 cases are under various stages of resolutions
- IRPs are appointed in most cases
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