Ruchi Soya Case: Watch Who You Wed – The Message In IBC’s Section 29A

The committee of creditors of Ruchi Soya Industries Ltd. met yesterday to finalise a resolution plan for the insolvent firm. Up for discussion were bids submitted by Adani Wilmar Ltd. and Baba Ramdev's Patanjali Ayurveda.

On June 12, lenders had declared Adani Wilmar as the highest bidder. The meeting yesterday was intended to finalise the resolution plan following a Swiss auction between the two bidders.

But a peculiar issue cropped up.

In a letter to lenders, Patanjali claimed that Adani Wilmar was ineligible to bid for Ruchi Soya under Section 29A of the Insolvency and Bankruptcy Code, 2016, according to two bankers familiar with the matter who spoke to BloombergQuint on condition of anonymity.

Nothing special about that. Section 29A, which lays down the eligibility criteria for bidders of an insolvent asset, has been widely used for accounts under resolution. In most cases, bidders have been deemed ineligible due to past defaults.

But in the case of Ruchi Soya, Patanjali says that Adani Wilmar is ineligible because of who the company's managing director is married to.

Pranav Adani, the managing director of Adani Wilmar and a member of the promoter family, is married to Namrata Adani. Namrata Adani is the daughter of Vikram Kothari, the promoter of Rotomac Group. Earlier this year, Kothari was arrested by the Central Bureau of Investigation after Bank of Baroda complained of a fraud perpetrated by the Rotomac Group.

Section 29A says that a resolution applicant is ineligible to submit a resolution plan if “connected” to a person who meets any of the ineligibility criteria. The definition of “connected person” makes reference to “related party” which in turn lists “relatives”. That list includes:

• Members of a Hindu Undivided Family
• Husband
• Wife
• Father
• Mother
• Son
• Daughter
• Son's daughter and son
• Daughter's daughter and son
• Grandson's daughter and son
• Granddaughter's daughter and son
• Brother
• Sister
• Brother's son and daughter
• Sister's son and daughter
• Father's father and mother
• Mother's father and mother
• Father's brother and sister
• Mother's brother and sister

And....

According to the two bankers quoted above, Patanjali has claimed that these provisions when read together will make Adani Wilmar ineligible to bid due to the marriage between Pranav Adani and the daughter of the defaulting promoter of the Rotomac Group.

BloombergQuint was not able to independently verify this claim.

“The company confirms that it is 29A compliant and company will not comment on baseless allegations,” an Adani Group spokesperson said in response to a query from BloombergQuint.

An email sent to Ruchi Soya's resolution professional was not answered. An email sent to Patanjali also did not receive a response.

According to the two people quoted above, the resolution professional has sought some time from the CoC to establish whether Adani Wilmar's bid is eligible or not. Since the resolution plan was submitted prior to the IBC amendment which introduced Section 29A, it is unclear whether the changes in the eligibility criteria would apply retrospectively.

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Until this week, Adani Wilmar was seen as a front runner to bag Ruchi Soya. It has proposed a resolution package which included Rs 4,300 crore in repayment to lenders and Rs 1,700 crore in equity infusion. This was higher than the offer made by Patanjali Group which included a Rs 4,065 crore repayment and Rs 1,700 crore equity infusion, BloombergQuint reported.

Patanjali has opposed Adani's plan earlier as well but on different grounds.

Last month, Patanjali wrote to the CoC and the resolution professional raising concerns about the manner in which the resolution professional's counsel had conducted itself. Law firm Cyril Amarchand Mangaldas had acted as legal adviser for Shailendra Ajmera, the resolution professional in the case, and also for Adani Wilmar. According to Patanjali, this led to conflict of interest. BloombergQuint has not reviewed a copy of the letter. The Economic Times, on June 12, reported that Cyril Amarchand Mangaldas had resigned as Adani Wilmar's legal adviser.

This story has been updated to correct the name of Pranav Adani's wife. The error is regretted.