Pawan Hans sale: Legal eagles warn of winning bid debarment over guideline breach

Even as Almas Global expressed surprise at the National Company Law Tribunal (NCLT) ruling, legal experts say the development may have its fallout in the Star9 Consortium’s winning bid for Pawan Hans being disqualified.

Expressing surprise at the NCLT order of April 20, Almas Global Opportunity Fund has termed it “abrupt” and “premature”, in a statement. The company claimed that the NCLT order had caught them off-guard as they had sought extra time to complete the transaction from EMC Ltd’s Committee of Creditors (CoC) given the adverse market conditions.

Together with Big Charter and Maharaja Aviation, Almas Global is also part of the three-way Star9 Consortium that had successfully bid Rs 211.14 crore for Pawan Hans. However, the NCLT order in the unrelated EMC Ltd case has the potential to derail the helicopter services company’s divestment for the fourth time.

Almas Global was declared the successful bidder for the bankrupt Kolkata-based power systems player EMC Ltd after its resolution plan was approved by NCLT. A delay on part of the Cayman Island-headquartered fund to deposit the money for the process led NCLT to pass its April 20 order, nine days ahead of the winning bid for Pawan Hans was announced.

In its statement, Almas Global said that the company had already initiated the process of moving to the National Company Law Appellate Tribunal (NCLAT) – the higher appellate authority – to make the payment of the stipulated amount and conclude the transaction for EMC Ltd’s acquisition as per the approved resolution plan.

“Even though this overall NCLT process and order had shaken our confidence a bit in the overall process, nevertheless, we stay committed to investing in India and Indian entities,” the Cayman Island registered fund noted.

Meanwhile, legal experts have told Business Today that the Star9 Consortium bid for the Pawan Hans – a 51:49 joint venture helicopter services (JV) between the government and ONGC – may be disqualified if Almas Global is found to have breached the disinvestment guidelines.

“The order by the Kolkata bench of NCLT does bring about some potent questions regarding the credibility of the majority bidder and thus of the bid itself, in the context of disinvestment of Pawan Hans,” said Neha Singh, associate partner at law firm Link Legal.

 
Failure to implement resolution plan

The NCLT in its ruling had observed that Almas Global, after being a Successful Resolution Applicant (SRA) concerning the corporate debtor EMC Ltd, did not fulfill its obligation of implementing the resolution plan under its terms. The NCLT observed that Almas Global had neither shown any intent nor taken any adequate steps to demonstrate its willingness to implement the resolution plan.

Therefore, the NCLT held that the company and its officers were responsible for contravention of the approved resolution plan in terms of Section 74(3) read with section 236 of the IBC. While forfeiting the performance bank guarantee of Rs 30 crore, the NCLT also observed that the attitude of Almas Global made it a fit case under Section 74(3) of the IBC which applies to anyone who knowingly and willfully contravenes any of the terms of such a resolution plan or is a party to its abetment.

“The Successful Resolution Applicant (SRA) has taken the entire process for a ride, and nothing can really excuse this audacity. The attitude of the SRA really will tick every parameter that can be applied to satisfy the ‘knowing and wilful contravention’ test laid down in section 74(3)46 of the Code on a reasonable construction,” said the NCLT order.

“Offences under Section 74(3) of the IBC is punishable with imprisonment of not less than one year, but may extend to five years or with fine which shall not be less than one lakh rupees, but may extend to one crore rupees or with both. As per Section 236 of IBC offences under the code will be tried by a special court established under the Companies Act,” said Ajay Shaw, partner at DSK Legal.

Government examining NCLT order

The government is presently examining the NCLT order to determine if any Department of Investment and Public Asset Management (DIPAM) guidelines were breached by the bidder.

“The ruling of the NCLT will now need to be examined in the context of the divestment of Pawan Hans where Almas Global is part of the consortium that has bid for Pawan Hans to assess whether, on account of the NCLT ruling, Almas Global and the consortium of which it is a part will be disqualified or will result into them not fulfilling the eligibility criteria,” said DSK Legal’s Shaw.

“The NCLT order will need to be looked at closely to evaluate if this leads to breach of DIPAM disinvestment guidelines, which essentially prescribes disqualification of a bidder inter alia on account of any conviction by a court of law or indictment or adverse order by a regulatory authority that casts a doubt on the ability of the bidder to manage the public sector unit when it is disinvested,” cautioned Link Legal’s Singh.

“Since Almas Global holds 49 per cent in the successful bidder, i.e., Star9 Mobility, the above could potentially lead to the disqualification of the bidder and also the bid,” she quickly added.

DIPAM declared the consortium of Star9 Mobility as the winning bidder for the 37-year-old Pawan Hans after three previous unsuccessful attempts at its divestment.

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