oppn parties IBC: Should Companies Be Handed Back To Promoters Who Ruined It?

News Snippets

  • Centre asks states to give shelter and food to migrant workers to stop them from taking to the streets
  • RBI cuts repo rate by 75 bps, the steepest in 10 years
  • Centre writes to states regarding laxity in monitoring people who had arrived from abroad between January and March
  • Kerala reports a spurt in new cases
  • With 124 fresh cases on Friday, the number of reported cases in India stand at 854
  • Five of a family, including a 9-month-old-baby test positive for Covid-19 in Nadia district in West Bengal on Friday
  • The Pakistani army is reportedly forcibly moving all Covid-19 patients to PoK and Gilgit
  • Untimely azaans in J&K mosques spark panic gathering
  • Stocks rise - Sensex up by 1400 points and Nifty goes above the 8600 mark
  • Rahul Gandhi says the economic package is "the first step in the right direction"
  • The government announces wide-ranging measures to help the poor overcome the economic hardship caused by Covid-19
  • G20 leaders to hold a virtual meeting today to explore ways of fighting Covid-19 in a coordinated manner
  • The Delhi government orders testing of all medical staff after the positive test on a Delhi mohalla clinic doctor
  • As a fallout of a Delhi mohalla clinic doctor testing positive for Covid-19, 900 people in the chain quarantined
  • China offers help to India in the fight against Covid-19 and says India will win the battle at an early date
Death toll reaches 27 as Covid-19 cases across India reach 974 on Saturday
oppn parties
IBC: Should Companies Be Handed Back To Promoters Who Ruined It?

By Linus Garg
First publised on 2018-10-31 07:42:43

About the Author

Sunil Garodia Linus tackles things head-on. He takes sides in his analysis and it fits excellently with our editorial policy. No 'maybe's' and 'allegedly' for him, only things in black and white.
The contentious issue of erstwhile promoters making a bid for their previous company under the IBC has reared its head again after the promoters of Essar Steel submitted a revised bid that was much higher than the bid submitted by Arcelor Mittal-Nippon Steel combine, with a condition that the creditors withdraw from the resolution process. As this was a very late bid, it had the potential of derailing the resolution process. Since the revised Essar bid, at Rs 54389cr was substantially higher than the Arcelor Mittal bid of Rs 42000cr, the Committee of Creditors (CoC) could have been swayed. But more than 92% of the creditors have decided to go with the Arcelor Mittal-Nippon bid.

It is obviously wrong to allow the promoters who have ruined a company and brought agony to creditors to bid for their own distressed assets. The simple reason for this is that it should be seen as an attempt to buy their assets at a heavily discounted price. Some people can also see a degree of fraud in this as the creditors are forced to take massive haircuts. The question also arises that how could the promoters arrange so much cash for bidding when they had none to run the company. Further, would it be wise to hand the company back to the ones who ruined it in the first place?

Obviously, the short-term interests of the creditors would be served better by going with whoever makes the highest bid as that would prevent them from taking big hits. But those creditors who think prudently would like to take a long-term view and think of doing further business with the revamped entity to recoup their losses. If that is the idea, then there is no point going with a discredited management. Arcelor Mittal-Nippon would bring in international expertise and good corporate policies to revive the company.