Government To Blacklist Insolvency Bid Winners If They Don’t Pay Up
The government will blacklist successful bidders for insolvent firms who fail to pay the bid amount, a senior government official told reporters.
The government may also bar such companies at Request for Proposal or Expression of Interest stage, as amendments in the Insolvency and Bankruptcy law may take time, he said.
This comes after Liberty House, the successful bidder for taking over Amtek Auto Ltd., refused to honor payments to acquire the bankrupt firm. Liberty House had alleged that the process followed during resolution was flawed and that the resolution professional did not share adequate information about the company at the beginning.
The government is focussed on discouraging frivolous bids to ensure that post admission of resolution plans, and consequent spend of time and resources, the bids do not fall apart, Ministry of Corporate Affairs Secretary Injeti Srinivas was quoted as saying in a Confederation of Indian Industry press release. "Performance security and proposed punitive action against frivolous bids are some of the ways the government is approaching to streamline the implementations."
On Jan. 17, State Bank of India Chairman Rajnish Kumar had said that there needs to be a stiff penalty against bidders who are not serious about the insolvency process, Bloomberg News reported.