PSU privatisation: Centre asks for legal declaration from bidders

After halting the privatisation of Central Electronics (CEL) and Pawan Hans over legal issues, the Centre has introduced changes in the privatisation process by seeking a legal declaration from bidders that they have not been convicted by any court, or indicted or received any adverse order from regulators for a grave offence.

The changes have been introduced in the privatisation process, currently underway, for Ferro Scrap Nigam (FSNL).

Suitors will have to declare that they have not committed any “grave offence”, which includes any pending case of fraud under the provisions of the Securities and Exchange Board of India (Sebi) Act, 1992.

The bidders should not have any order passed against them or a member of the consortium by Sebi, casting doubt on the ability of the buyer to purchase a stake in the public sector undertaking (PSU). In case of Sebi’s order of prosecution against an interested party, disqualification from the privatisation process will arise only on conviction by a court.

This change comes after the Centre announced successful bidders of CEL and Pawan Hans, and later found the entities had adverse court orders against them. The winning bidder of CEL, Nandal Finance and Leasing, had a case pending before the National Company Law Appellate Tribunal. And one of the members of the consortium shortlisted as the buyer of Pawan Hans was found to have been in contravention of an approved resolution plan by the National Company Law Tribunal. The government has put the privatisation of both PSUs on hold.

Even as the current eligibility criteria states such bidders are not eligible for participating in the process, bids by such entities have jeopardised the Centre’s privatisation drive with Opposition political parties raising questions over the credibility of the buyers. A separate legal declaration from all interested parties is now being seen as a solution to plug this loophole.

In the declaration, the bidders or their sister concerns will have to declare that they have not received a charge sheet by any government authority or convicted by a court for an offence relating to the security and integrity of the country. They also have to declare that no investigation by a regulatory authority is pending against the bidder’s directors, key managerial personnel and parent entity.

In case a bidder is unable to provide such declaration due to any conviction, it is required to share the details, including names of persons involved, designation, offence, among others. An entity, which is disqualified, will not be allowed to participate merely because it has filed an appeal against an adverse order.