The government on Wednesday terminated the sale of Central Electronics Limited to Nandal Finance & Leasing owing to a pending money laundering case against the bidder in the National Company Law Appellate Tribunal (NCLAT), which disqualifies it from the divestment process.
The decision has been taken following a recommendation by the alternative mechanism (AM) team for “disqualifying the successful bidder, excluding the successful bid from any further consideration, and terminating the current transaction.” The alternative mechanism team includes finance minister Nirmala Sitharaman, minister of road transport and highways Nitin Gadkari and minister of state (MoS) for science and technology Jitendra Singh.
The Department of Investment and Public Asset Management (DIPAM) said in a statement, “While keeping the Letter of Intent (LoI) on hold, the government examined these allegations and found merit only in one allegation regarding pendency of a proceeding in NCLAT against the successful bidder that may result in disqualification of the bid under applicable provisions of Preliminary Information Memorandum (PIM) and Request for Proposal (RFP).”
The case against Nandal Finance has been filed by the Registrar of Companies. As per the DIPAM guidelines, any entity becomes ineligible for the bidding process, if the promoter group or the director is facing any conviction in court. The sale of Central Electronics Limited, which was incorporated in 1974 under the Department of Scientific and Industrial Research (DSIR), was approved to Nandal Finance worth ₹210 crore in November last year. In March this year, the transaction was scheduled to be completed. Apart from Nandal Finance, JPM Industries Ltd had also participated in the bid.
However, in January this year after receiving complaints from employees of Central Electronics Limited, the government put on hold issuing the letter of intent to Nandal Finance. The CEL’s employees had approached the Delhi High Court alleging that the company is undervalued and that Nandal Finance and JPM Industries are inter-related as they have a common director.
The development comes months after the government put the privatisation of beleaguered helicopter company, Pawan Hans on hold in May. The government had approved the sale of Pawan Hans to Star9 Mobility worth ₹211 crore, which is above the government’s quoted price of ₹119 crore. Star9 Mobility is a three-way consortium of Cayman Island-based Almas Global Opportunity Fund—a subsidiary of Dubai-based Almas Capital, Mumbai-based Big Charter Private Limited, and Delhi-based Maharaja Aviation Private Limited. However, following the financial discrepancies by Almas Global Opportunity Fund in a previous bid, the divestment process was put on hold.
In February this year, the government revised its disinvestment estimate for the current financial year to ₹78,000 crore, while setting the target at ₹65,000 crore for FY2022-23. In order to meet its divestment target, the government had scheduled the divestment of Life Insurance Corporation (LIC), Bharat Petroleum Corporation Ltd (BPCL), RINL, Pawan Hans, Air India and Central Electronics Limited. The divestment process for LIC via IPO and the sale of Air India to Tata Group has been completed this year. Meanwhile, the government has said that the BPCL divestment is not on cards this year.
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