State Bank of India Chairman Rajnish Kumar on Monday played down concerns on promoters bidding for their companies as part of the insolvency process, saying creditors will set out some preconditions before a resolution plan is finalised. Kumar said that while defaulting promoters would be “within their rights” to bid for their companies under the insolvency resolution process, this was not a concern since a Few preconditions would be set by the creditors for resolution plans.
“Ethical, I don’t know, but legally they are within their rights to participate,” Kumar said, speaking on the sidelines of the Fibac banking conference.
Among the conditions Kumar mentioned were that bidders should not be wilful defaulters. Moreover, a forensic audit should clear them of any wrongdoing and finally, the quality of the resolution plan would be taken into account. “The idea will be to enhance the enterprise value and anybody who gives the maximum enterprise value will be in the interest of the enterprise itself, the lenders and the country as a whole,” Kumar said.
Kumar said wilful defaulters or people who have diverted funds, as proved in the forensic audit, will not be allowed to participate.
“But otherwise if the law permits existing promoters to participate, then we can’t help it. It is very much there and we have to abide by the law,” he added.
A section of media had reported last month that Essar Group submitted an expression of interest for Essar Steel, which is among the 12 large defaulters identified by the RBI to be resolved under the Insolvency and Bankruptcy Code. Recent reports indicate that the government was planning to amend the IBC to ensure that promoters of companies admitted to the NCLT are unable to retain management control. FE