Insolvency process: Shut out dubious promoters, says Sajjan Jindal

A day after regulations made it tougher for promoters to buy back their companies undergoing insolvency, JSW Group Chairman Sajjan Jindal urged authorities not to allow filing of company rehabilitation plans by dubious promoters, especially in order to prevent misuse of Insolvency and Bankruptcy Code.
 

“Dubious promoters should not be allowed to submit the rehabilitation plan to prevent misuse of the IBC. Also, the bidding criteria should be spelt out explicitly before inviting the bids. This will avoid likely litigation,” Jindal tweeted on Wednesday.

Jindal has been quite vocal recently over the ongoing process at National Company Law Tribunal (NCLT). Of the 12 companies identified for insolvency by a Reserve Bank of India (RBI) directive, five belong to the steel sector.

Of the five, Sajjan Jindal-led JSW Steel has bid for two: Monnet Ispat and Bhushan Steel. Mumbai-based JSW Steel is looking to grow its capacity to 40 million tonnes per annum from 18 mtpa at present. So far, it has largely grown its capacity inorganically. At present, Bhushan Steel has an annual capacity of around 5.6 million tonnes, while Monnet Ispat holds 1.5 mtpa.

The government on Tuesday said the Corporate Insolvency Resolution Process Regulations provide for more stringent scrutiny of resolution applicants before their plan is considered by the committee of creditors. The amendment is aimed at ensuring that “as part of due diligence, before approval of a resolution plan, the antecedents, creditworthiness and credibility of a resolution applicant, including of promoters, are taken into account by the committee of creditors,” the Insolvency and Bankruptcy Board of India said on Tuesday.

Last month, reports said Essar Group had submitted an expression of interest for Essar Steel, one of the NCLT-listed companies. Meanwhile, globally, promoters can bid for their own companies undergoing insolvency, said experts.

On Monday, Rajnish Kumar, chairman, State Bank of India, had clarified that legally, promoters of NCLT-listed companies are within their right to participate in the bidding process. “Ethically I don’t know, but legally they are within their rights to participate,” Kumar had said.

With his tweet, Jindal has waged a war of words on promoters aiming to bid for their NCLT-listed companies. Last week, Jindal had said that shares of NCLT-listed companies should be suspended in line with global practice to avert speculation in the market.

* JSW Steel has bid for Monnet, Bhushan Steel

* Globally, promoters are allowed to bid for their companies

* SBI chairman says legally promoters are within their rights to participate in bidding