AGI Greenpac’s acquisition of HNG may be challenged by rival bidder

AGI’s resolution plan was cleared by the lenders even though it is yet to get approval of the Competition Commission of India as required.

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AGI Greenpac’s proposed acquisition of Hindusthan National Glass & Industries (HNG), a company under insolvency resolution, may be challenged by rival bidder Independent Sugar Corporation (INSCO) for violating conditions set out in the resolution process.

The role of the resolution professional in this case is also under scrutiny, according to people aware of the matter.

Lenders of HNG voted in favour of the resolution plan submitted by AGI Greenpac on October 28, even though the Competition Commission of India hadn’t approved its application, a key condition of the resolution process.

INSCO is contemplating challenging the decision of the committee of creditors (CoC) and the basis on which the voting was conducted, in violation of the conditions laid out in the Request for Resolution Plan (RFRP), people familiar with the matter said.

Girish Juneja, the resolution professional (RP) appointed to manage HNG during the insolvency resolution process, had highlighted to the bidders the specific provisions of the RFRP requiring CCI clearance before seeking approval from the CoC, the people said, adding that the lenders considered and approved AGI Greenpac’s plan without the requisite CCI approval in place.

“The RP deviated from the Insolvency and Bankruptcy Code and the RFRP and intimated the individual resolution applicants that they may obtain CCI clearance after the CoC had accepted their resolution plan, but before he submits the approved plan to the adjudicating authority,” said Sourasubha Ghosh, a partner at IndusLaw. “However, ultimately he didn’t even adhere to this deviation and went ahead with filing of the plan of AGI with the National Company Law Tribunal without AGI obtaining CCI approval. This is a violation of both statutory and RFRP deadlines and even the deadline set up by the RP.”

Juneja could not be reached for comment on the matter.

The adjudicating authority in this case is the Kolkata branch of the NCLT. The last day for the RP to submit the resolution plan was November 9.

At the time of publishing this story, AGI had not received the CCI’s approval for its revised application.

“Whether the CCI approves or rejects the revised application of AGI is a different matter, but what is relevant in this case is whether the deadline set in the IBC and RFRP and further relaxed by the RP to a limited extent was adhered to,” said Ghosh. “In my view, the said timelines, which are extremely important, are violated and breached and the manner of approving the plan is concerning and should be a matter of judicial scrutiny and review, as available under the code.”

HNG, which is under insolvency, received bids from three resolution applicants in July 2022 – Ahmedabad-based Nirma Industries, INSCO, a Madhwani Group company in Uganda, and AGI Greenpac, previously known as Hindustan Sanitaryware and Industries.

Nirma Industries didn’t participate in the third and final round of bidding. The other two companies applied to the CCI for approval. The CCI approved INSCO’s application within 24 hours of filing.

However, the CCI marked Form 1 filed by AGI Greenpac on September 27 as invalid on October 22. It asked the company to file Form 2 with more details. Form 2 is sought when the market share of a company exceeds 15 percent.

AGI Greenpac offered Rs 2,206 crore for HNG, while INSCO’s deal constituted a cash outlay of Rs 1,900 crore and 5 percent equity.

Lenders to HNG, accounting for 98 percent of the loans to the company, voted in favour of AGI’s resolution plan, while those accounting for 88 percent of the loans voted for INSCO’s plan.

According to experts, the NCLT may not be in a position to override the decision of the CCI in this case and in all likelihood will go by whatever decision is taken by the competition watchdog. If the CCI rejects AGI’s application, HNG may be up for liquidation, and in that case, the company’s creditors may have to take a significant hit.

However, if INSCO opts to challenge the plan before the NCLT, it might take a while before the deal goes to the rightful bidder.

According to experts, the CoC or RP should have set a strict deadline for the successful resolution applicant to obtain and submit the approval from the CCI before the RP files the resolution plan with the NCLT.

However, they said in this current case, the way the CoC and RP acted has raised more questions than answers and brought them both under scrutiny.

If the deal is awarded to AGI, it will set a wrong precedent and raise more doubts about the IBC process, experts said.

Kolkata-based HNG, the largest player in the glass container business in India, was dragged into insolvency proceedings last year by its third-biggest lender, DBS Bank, which has an outstanding loan of Rs 446 crore with the company.

HNG was admitted into insolvency resolution proceedings on October 21, 2021, after failing to reach a one-time settlement with a group of its secured creditors.

The company has secured loans of Rs 3,337 crore and Rs 213 crore of working capital/operational loans from lenders led by SBI – Rs 1,273 crore; Edelweiss – Rs 789 crore, DBS Bank – Rs 446 crore, Life Insurance Corporation – Rs 267 crore and others.

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