Appellate tribunal NCLAT has upheld the NCLT order to allow Jindal Stainless to participate in the auction of debt-ridden Rathi Super Steel even after a bidder was selected.
The National Company Law Appellate Tribunal (NCLAT) said the NCLT "did not commit any error" as sales were not completed and the object was to obtain the maximisation of the assets, hence it "sees no reason to take a different view".
"The Adjudicating Authority (NCLT) did not commit any error in taking note of the offer made by Respondent No 1 (JSL) who made an offer of initial Rs 190 crore and revised offer was Rs 201 crore i.e. much higher than the one on which Appellant was declared successful bidder," the NCLAT said.
Jindal Stainless Ltd (JSL) submitted its Rs 190 crore bid for Rathi Super Steel after the liquidator forwarded the application before the National Company Law Tribunal (NCLT), seeking closure of the liquidation process and approval of terms and conditions of sale to Rimjhim Ispat and Synergy Steel.
In the e-auction, Rimjhim Ispat and Synergy Steel had emerged as the highest bidder with a Rs 177.50 crore offer for Rathi Super Steel as a going concern and a letter of intent was also issued on July 1, 2021.
However, on October 3, 2021, JSL approached the NCLT and filed an application for consideration of its bid for acquiring Rathi Super Steel as a going concern. JSL had offered Rs 190 crore payable within 90 days from acceptance of the bid.
On this the Delhi-based Principal Bench of the NCLT had on September 28, 2022, directed JSL to deposit EMD (Earnest Money Deposit) of Rs 50 crore within three days of the pronouncement of this order.
The NCLT further directed to proceed to hold another auction between successful bidder Rimjhim Ispat and the other two bidders namely Adya Oversees and Bansal Wire Industries within seven days of this order.
Moreover, the insolvency tribunal had also fixed a reserve price of Rs 201 crore for the auction and said if JSL fails to fulfil the pre-deposit condition then the liquidator can confirm the sale to the highest bidder Rimjhim Ispat and proceed to collect the balance amount.
This was challenged by Rimjhim Ispat and Synergy Steel before the appellate tribunal, which passed an interim order adjourning the auction for 15 days.
However, the NCLAT said: "We thus are of the view that Adjudicating Authority did not commit any error in passing the impugned order".
The appellate tribunal further added that the NCLT has given the opportunity to both appellants - Rimjhim Ispat and Synergy Steel and respondent Jindal Stainless to participate.
The NCLT has "also put a condition to deposit Rs 50 crore by the Jindal Stainless to ensure the bona fide as a pre-deposit of the Jindal Stainless, we thus do not find any good ground to interfere with the impugned order," the NCLAT said.
The corporate insolvency resolution process against Rathi Super Steel was initiated by the NCLT on June 12, 2019. However, it failed to attract any resolution plan following which it went for liquidation.
Later a notice was issued by the liquidator for an e-auction of the sale of the company on September 30, 2020, as a going concern at a reserved price of Rs 200 crore, however, it failed to attract any bidder. Despite several attempts and reducing the reserve price, no bidder came forward.
The last attempt for e-auction was made on February 2021 on a standalone basis at a reserved price of Rs 104 crore, however, no bid was ever received by the liquidator.
Later on June 3, 2021, Rimjhim Ispat approached the liquidator expressing interest in acquiring the company and submitted their final offer of Rs 153 crore. Two other bidders also approached the liquidator and the e-auction process was conducted on June 17, 2021, in which Rimjhim Ispat emerged as the highest bidder with Rs 177.50 crore offer.
Following this, a letter of intent was also issued.