IBBI Announces New Norms To Stop Successful Bidders From Backing Out
The Insolvency & Bankruptcy Board of India made a security amount compulsory for bidders to prevent them from backing out after winning stressed assets under the bankruptcy law.
The so-called performance security will be forfeited if they fail to implement the resolution plan or contribute to its failure, according to a notification on the board’s website. The nature, value, duration and source of the security will be decided by the committee of creditors.
The bidders will be required to submit a statement confirming whether they missed implementing a resolution plan in any other case.
Liberty House U.K. and U.S.-based Ingen Capital Group are among the bidders selected by lenders who backed out at the last minute in at least four resolutions under the Insolvency and Bankruptcy Code, which has shown success in recovery and settlement of bad loans. The new guidelines allow creditors to approach the National Company Law Tribunal or the appellate tribunal for action against such parties.
Liberty House U.K., which bid for Amtek Auto Ltd. and Adhunik Metaliks Ltd., backed out citing incomplete information provided by the resolution professional during due diligence. Adani Wilmar Ltd., selected as the successful bidder for Ruchi Soya, withdrew its bid citing delays in the resolution process. Similarly, Ingen Capital Group’s Rs 1,000-crore offer for Orchid Pharma Ltd. was selected by lenders but it eventually backed out.
Lenders to Amtek Auto have already approached the NCLAT to seek some punitive action against Liberty House and have sought permission to restart the resolution process. The appellate tribunal has yet to decide on the matter.
Earlier, lenders to ABG Shipyard Ltd. had voted to reject Liberty House’s bid after they “lost confidence” in the bidder. The shipbuilder is now headed for liquidation as no other bid was received.