2022 (8) TMI 180 - HC - Companies Law

Sale of the combined 42.25% stake in the Company known as IL FS Engineering and Construction Company Limited - validity of advertisement and the invitation document - monetization of assets in a transparent way - HELD THAT - It appears that the petitioner has not submitted the Expression of Interest. The petitioner could have submitted Expression of Interest without prejudice to its rights. From the record it appears that earlier also the advertisement and invitation document were published. However, the sale could not materialize. This is for the third time the advertisement and the invitation document are published. The sale of the 42.25% stake of respondent no.2 and 3 in the Company known as IL FS Engineering and Construction Company Limited is published pursuant to the Proposed Resolution Framework for IL FS group filed before the NCLT. Under Clause V proposed process for Asset Level Resolution is spelt out. The petitioner has failed to submit Expression of Interest. If the petitioner has any legitimate objection to the sale, then it is for the NCLT to consider it in terms of payment of financial bid amount by the successful applicant to a designated account will be required to be made, and it is for the NCLT to consider whether sale has been conducted in a fair and transparent manner and according to the resolution. Petition disposed off.

Summary

Issues:
Challenging advertisement and invitation document for sale of stake in a company. Allegations of lack of transparency and suspicion of intentions. Violation of sale process scheme. Exemption of initial bidder from eligibility criteria. Use of Swiss Challenge Method. Jurisdiction of High Court to entertain the petition.

Analysis:
The petitioner challenges the advertisement and invitation document for the sale of a stake in a company, alleging lack of transparency and suspicion regarding the intentions of the respondents. The petitioner argues that the sale process is not being conducted in a fair and transparent manner, starting from the respondents already having received a "binding offer" from an unnamed party. The petitioner contends that the respondents have not conducted a valuation exercise as required and have not clarified the basis for the eligibility criteria in the invitation document. The petitioner raises concerns about an unknown initial bidder being exempted from the transparent sale process, putting other bidders at a disadvantage.

The petitioner asserts that the sale process should ensure the best possible price and not be hijacked by vested interests. It is alleged that the respondents are applying dual standards by exempting the initial bidder from eligibility criteria. The petitioner opposes the adoption of a "Swiss Challenge Method," introducing uncertainty and acting against the mandate of the authorities. The petitioner requests the court to direct the respondents to restart the sale process for the stake in the company.

The respondents argue that the writ petition is not maintainable as the companies are not amenable to the writ jurisdiction of the court. They highlight that the sale process has been transparent, with one binding offer received. The respondents emphasize that interested parties can submit Expressions of Interest and access the data room, ensuring a fair process. They suggest that the petitioner has a remedy before the NCLAT and that the sale is being conducted in accordance with the Proposed Resolution Framework.

The court observes that the petitioner failed to submit an Expression of Interest and that the sale process is being conducted for the third time. The court notes the steps outlined in the Proposed Resolution Framework for the sale process, emphasizing checks and balances. The court finds the adoption of the Swiss Challenge Method permissible. The court concludes that if the petitioner has legitimate objections to the sale, it should be raised before the NCLT. The court declines to exercise its writ jurisdiction, stating that the NCLT is the appropriate authority to finalize the sale, and the petition is disposed of without costs.