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

News Snippets

  • S Jaishankar, Minister of External Affairs, says Pakistan should release and repatriate Kulbhushan Jadhav immediately
  • Karnataka Governor Vajubhai Vala asks the Speaker to hold the trust vote latest by 1.30 pm today
  • The Government sends a list of 24 questions to mobile app company that runs video app TikTok seeking answers for anti-national and obscene content carried on the platform
  • Sarvana Bhawan founder P Rajagopal, serving a life term for murder, dies in a Chennai hospital
  • SC allows time till July 31 to the Ayodhya mediation panel
  • IT department attaches "benami" plot worth Rs 400cr in Noida. The plot allegedly belongs to BSP leader [email protected]@@s brother and his wife
  • Dawood [email protected]@@s nephew, Md. Rizwan Iqbal, was arrested from Mumbai airport as he was waiting to board a flight to Dubai
  • Trouble brews in Bihar JD(U)-BJP alliance as Bihar police asks special branch officers to keep tabs on RSS activities
  • Trust vote in Karnataka assembly today. With rebel MLAs deciding to stay away after the SC order, the Congress-JD(S) government is likely to fall as it does not have the numbers
  • Amit Shah says the government will identify and deport illegal immigrants from all parts of the country
  • Reports from Pakistan confirm that Hafiz Saeed has been arrested and sent to jail
  • After the SC order, Karnataka Speaker says he will go by the Constitution in deciding on the resignations of the 16 MLAs
  • Rebel MLAs say they will not attend the trust vote on Thursday
  • Supreme Court rules that rebel MLAs cannot be forced to attend the assembly and vote in the floor test
  • Both the Centre and the Assam government have sought re-verification of up to 20% of draft NRC data
International Court of Justice agrees with India, stays Kulbhushan Jadhav's execution. It asks Pakistan to allow consular access to the accused.
oppn parties
IBC: Should Companies Be Handed Back To Promoters Who Ruined It?

By Linus Garg

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.