The government is looking at a new mechanism for financial bids for companies facing bankruptcy action to make the process more consistent and end confusion in the resolution process.
Sources told TOI that a “hybrid model” is being considered, where the top three contenders based on technical parameters will bid through an online system. This will also help maximise value of the asset for banks, which may have to settle loans at less than the face value, in addition to increasing transparency in the process.
“In future, we can look at other options, but a hybrid model can address some of the concerns that have come up,” said an official, who did not wish to be identified.
A similar model is expected to be tried for disinvestment through the strategic sale route. The changes under consideration follow experiences in several cases, such as Binani Cement, where Dalmia Bhara twas recommended by the lenders to take over the company. But, the second-highest bidder UltraTech offered Binani to pay a higher amount, resulting in a dispute which is yet to be resolved.
In fact, several experts and government officials said that a ruling in favour of UltraTech, the Aditya Birla group company, may prompt a similar outcome in other cases as well, where a lower bid may be revised later to match the highest one.
In several other cases, too, similar problems are seen — one of the reasons for slowing down resolution process, even as 12 high-profile cases are identified by the government. The finance ministry has made it clear that maximising realisation from the companies facing insolvency action should be the key parameter in selecting the winning bidder and has stayed away from interfering in any of the cases.
Although the insolvency process started a little over a year ago, the resolution has been slow in the initial months as the government is learning from the experience, sources said. It has already initiated plans to amend the Insolvency & Bankruptcy Code (IBC) to smoothen the rough edges that have been noticed.