The Centre has terminated the sale of Central Electronics Ltd (CEL) to Nandal Finance & Leasing as the litigation pending against the successful bidder at the National Company Law Appellate Tribunal (NCLAT) violates the eligibility criteria for the sale.
The Alternative Mechanism, consisting of Finance Minister Nirmala Sitharaman, Minister of Road, Transport and Highways Nitin Gadkari and Minister of State (MoS) for Science and Technology Jitendra Singh, has recommended “disqualifying the successful bidder, excluding the successful bid from any further consideration, and terminating the current transaction.”
Several allegations were made against the bidder and the process to shortlist Nandal Finance as the buyer of CEL. “While keeping the Letter of Intent (LoI) on hold, 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 Department of Investment and Public Asset Management (DIPAM) said in a statement.
The case pending against Nandal Finance is a winding up petition filed by the Registrar of Companies (RoC) over allegations of money laundering. The litigation led to a situation where one government department approved the sale of a public sector undertaking (PSU) to a private company, which is being sought to be wound up by another government department.
In November 2021, the Centre approved the sale of CEL to Nandal Finance for Rs 210 crore. JPM Industries Ltd was the second company to have shown interest in acquiring the PSU, with a bid of Rs 190 crore. In January 2022, the government did not issue a letter of intent to Nandal Finance after allegations by employees’ association of Central Electronics that the two bidders had a common director besides a pending case against Nadal Finance at NCLAT. The IMG had sought the opinion of the legal advisor about the allegation that the two firms had a common director. The legal advisor had opined that having common directors is allowed under the Companies Act, and is not a deal breaker.
Post shortlisting of successful bidder for CEL, the Congress party and the employees’ union had alleged underselling of the PSU. The government had refuted such claims and had justified the PSU’s valuation, which was calculated by government-appointed transaction advisor and asset valuer, after which the Centre arrived at the reserve price of Rs 194 crore for the company.