Mar 4, 2018

Insolvency process: Bhushan Power case faces issues over bid secrecy

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The legal battle that has broken loose in the insolvency resolution process of Bhushan Power & Steel underlines the importance a confidentiality clause in bidding or deals involving mergers and acquisitions. The two bidders, Tata Steel and Liberty House, seem to know each other’s offer price and have been throwing that as an argument supporting their claim for bailing out the troubled lenders to the steel company.

Abhishek Manu Singhvi, the Tata Steel lawyer, last week stated in the National Company Law Tribunal that Liberty House’s bid was higher by “only Rs 10 billion”. The Liberty offer, he argued, came after it was informed that the Tata Steel bid was the highest. He said the Liberty offer should not be considered on this ground.

London-based Liberty House, too has been claiming its bid is higher than that of the Tata’s. While there seems to be no contradiction in the statements by the two sides, other stakeholders are questioning the breach of confidentiality in the whole process.

“It’s a sealed bid. I do not know where Tata Steel got this information. I am surprised how Tata Steel can make such statement. I don’t wish to comment more on this matter,” Rajiv Bajaj, executive director, Business Development (Asia), Liberty House, told Business Standard.

Calls and text messages to Singhvi and his office did not get any response, while questions emailed to Tata Steel remained unanswered.

Pavan Kumar Vijay, founder, Corporate Professionals, and an expert in the Insolvency and Bankruptcy Code said the law provided for confidentiality but it was not being seriously implemented earlier. “All persons involved, whether resolution professional, valuer or those representing creditors, are now made to sign a confidentiality agreement. This is required not only for the money part but all aspects of the resolution process.” He said action should be taken against those breaching it.

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