Why discriminate against clean promoters of NCLT cases: Sajjan Jindal

JSW Group chairman Sajjan Jindal on Tuesday questioned the finance ministry on discriminating against clean promoters of NCLT cases by not allowing them to bid for their own assets when promoters of non-NCLT cases are allowed to retain their positions while a resolution plan is being worked out for their companies.

"Existing promoters are allowed to be in management in non-NCLT cases with deep debt restructuring involving large haircuts if they are not wilful & non-cooperative borrowers. If so, why to differentiate in #NCLT cases to debar legitimate promoters in bidding process? @arunjaitley," said Jindal who has earlier crusaded against allowing "dubious promoters" to bid for their own distressed assets in the insolvency resolution process under the IBC.

At present, apart from the 12 companies like Essar Steel, Bhushan Steel etc. that were referred to the insolvency tribunal by their respective lenders, there are a host of companies that are trying to work on a resolution plan by drawing on the suggestions given both by the promoters as well as the banks that have lent to them. The intent is to save the companies from being roped in the corporate insolvency resolution process.


Many companies like Uttam Galva Steel, Jaiprakash Associates, BILT and Jai Balaji are currently busy working out a restructuring plan. They have been given a deadline of December 13 to do this, failing which they will automatically be referred to the NCLT by December 31.

However, Jindal has pointed out to the difference in the treatment of clean/ non defaulting promoters between NCLT and non-NCLT cases and has questioned the finance minister Arun Jaitley on the same in his tweet.

The reference for this is the ordinance that was promulgated on November 23 amending the Insolvency and Bankruptcy Code, 2016 in which the government barred resolution applicants who have been wilful defaulters or indulged in fraudulent or undervalued transactions to bid for distressed assets. Other disqualifications were someone who has had a non-performing account for more than a year, or individuals/companies connected to promoters/companies disqualified on the above basis.

Promoters who want to get back in the bidding game will have to furnish the principal and interest amount before being allowed to submit a resolution plan.

This has put lenders to many companies which earlier had only their promoters as the most viable bidders in the fray, in a fix. Similarly, some names like ArcelorMittal, which were earlier actively bidding for assets like Bhushan Steel and Essar Steel, were taken by surprise as they hold a 29% stake in the defaulting company Uttam Galva. They later clarified that they do not hold a controlling stake which is reason enough for them to stay active.

However, with a clutch of prospective offers trashed with the ordinance coming in, experts say this might bring down the valuation of the bids and lead to less competitive bidding as well as compel banks to take even larger haircuts.