He said there is no blanket bar on promoters from bidding for delinquent companies that are being sold to recover bank dues. Only those who have not serviced their loan accounts by not even paying the interest on loans have been barred.
Tightening rules to prevent errant founders from misusing the 11-month-old bankruptcy law to regain control, the government earlier this month barred promoters whose borrowings have been classified as non-performing for a year or more and that are unable to pay overdue amounts, including interest and charges.
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"The IBC process will go on and we have not barred them completely. There is no blanket bar. All it says is that if you have a non-performing account on the day of bid please make it a performing account. Standardise your account...
"If somebody says I owe the bank money, but I won't pay the money, I won't even service, but at half the cost I want my company back, I don't think in India it is going to be acceptable," he said at the HT Leadership Summit here.
He said the political opinion in India would not have supported the functioning of the Insolvency and Bankruptcy Code (IBC) if after the substantial haircut the same promoter who ran the company and is a loan defaulter won the firm back.
"Nothing would have changed except that bank would have taken a hit. Now if in the initial number of cases these would have happened and banks take the hit and same people were back again, I don't think the political process in India would have ever supported the IBC," Jaitley said.
The RBI had in June referred 12 steel manufacturers, power and construction companies with over Rs 5,000 crore of overdue loans each to insolvency courts. These include Bhushan Steel, Essar Steel, Lanco Infratech, Monnet Ispat and Electrosteel, for resolution under this law.
In several of these cases, the original promoters themselves are among the bidders.
Amid rising concerns that a defaulting promoter could wrest back control of the company that is under insolvency even as banks take a hit on the loans, the government promulgated an ordinance to amend the IBC.
As per the ordinance, those who have their accounts classified as non-performing assets (NPAs) for one year or more and are unable to settle their overdue amounts include interest thereon and charges relating to the account before submission of the resolution plan would be ineligible to bid in the auctions.
Corporates, promoters, holding companies, subsidiaries, and associate companies or related parties undergoing insolvency resolution or liquidation under the IBC would not be eligible for bidding for the stressed assets.