In
In
While the Adani group was reportedly among the initial 24 applicants, it eventually submitted an unsolicited bid after the
The Adani group defended its late-stage bid on the basis that the bids submitted within the deadline did not reflect the value of the company and that rival bidders were preventing value maximization and forming a cartel to restrict full and fair competition.
The CoC directed prospective bidders to submit resolution plans by
While SC Lowy withdrew from the process on grounds of unfair treatment, both
A resolution plan under the Insolvency and Bankruptcy Code, 2016 (IBC) is not a sale or an auction or a recovery - it is a plan for insolvency resolution of the borrower as a going concern while maximizing the value of its assets and promoting entrepreneurship, availability of credit, and balancing of interests of all stakeholders.
The objectives of the
The principles relied on by the Bankruptcy Law Review Committee included symmetry of information between creditors and debtors and time-bound process to better preserve economic value. While late-stage bids may be acceptable in exceptional circumstances, this cannot be allowed to become a regular feature of the CIRP.
In the
Eventually, UltraTech's revised resolution plan was approved by the creditors and subsequently, by the
However, the principle of value maximization is not intended to be, and indeed cannot be, the paramount principle for consideration and approval of resolution plans under the IBC. It is also noteworthy that the NCLT and NCLAT judgments in the
In the DHFL case, the COVID-19 pandemic could arguably qualify as an exceptional circumstance. However, given the level of interest in DHFL as per the original bids, it is difficult to view the pandemic as justification for acceptance of a bid after the deadline and subsequent re-opening of the bidding process.
The IBC sets out a time-bound process, which allows for information symmetry, transparency and adequate time to all bidders to submit resolution plans on a level playing field. Allowing parties to put forth bids after a publicly announced deadline, which are inconsistent with their original proposals, provides an unfair advantage to such parties and creates information asymmetry.
A letter written by a bidder to the CoC and the
The letter continued: “Processes run in reliable and developed markets define clear parameters for a transparent structured process which are strictly adhered to, creating certainty for bidders and thus maximising value. Breaches in confidentiality and opaqueness undermine this certainty, discouraging good faith bidders from participating and encouraging tactical bidding which does not lead to value maximization.”
While creditors may be tempted to prolong the CIRP in anticipation of a better return or there may be other extraneous forces at play, the IBC-mandated process and timeline must be respected absent compelling circumstances.
Otherwise, serious bidders will be deterred from participating and any litigation on account of alleged procedural lapses will prolong the process, waste public funds and ultimately harm the corporate debtor and the public.
Meanwhile, more than a year after initiation of the CIRP, DHFL's CoC is evaluating the latest bids received and the possibility of legal action against the CoC in respect of the bidding process remains open.
This insight/article is intended only as a general discussion of issues and is not intended for any solicitation of work. It should not be regarded as legal advice and no legal or business decision should be based on its content.
Mr
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