Centre may drop CEL sale amid ongoing money laundering case against bidder

A case is pending against Nandal Finance at NCLAT; RoC has also filed a winding-up petition against the firm

The Central government may drop the current sale process of Central Electronics Ltd amid a pending case filed by the Registrar of Companies (RoC) against Nandal Finance and Leasing, the winning bidder of the firm, over an alleged case of money laundering.

The case, which is pending against Nandal Finance at the National Company Law Appellate Tribunal (NCLAT), involves serious allegations of money laundering filed by the Serious Fraud Investigation Office (SFIO). The RoC has filed a winding-up petition against the firm.

These allegations and the pending litigation may prevent the sale of CEL to Nandal Finance, an official said.

The next hearing of the case at NCLAT is listed for September 23, where the RoC’s lawyer has been directed to file relevant portions of the SFIO report in a sealed cover and submit to the court’s registry.

The decision to halt the sale of CEL to Nandal Finance is likely to be taken by the Core Group of Secretaries on Divestment (CGD), headed by the Cabinet Secretary, by next week. Once approved by the CGD, the proposal would be tabled before the Alternate Mechanism that consists of Finance Minister Nirmala Sitharaman, Minister of Road, Transport and Highways Nitin Gadkari and Minister of State (MoS) for Science and Technology Jitendra Singh. The decision on the matter would then be officially announced.

Last month, CGD had sought more information from the inter-ministerial group (IMG) co-chaired by Secretary of Department of Investment and Public Asset Management (DIPAM) and Secretary of Department of Science and Technology, to enable it to decide whether or not CEL should be handed over to the shortlisted bidder. The IMG is learnt to suggest calling off the sale as the recent developments have led to a situation where one government department has approved the sale of a public sector undertaking to a private company, while the other is pursuing a legal case to wind up that company.

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 and that there was 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, the successful bidder, 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.

The privatisation of another PSU, Pawan Hans, had met a similar fate when one member of the consortium that was shortlisted as the buyer, was found to be prosecuted by the National Company Law Tribunal (NCLT) for not paying up after emerging as the successful resolution applicant under the insolvency process for a Kolkata-based power transmission company EMC Ltd. The government has decided to wait for the appeal filed by winning bidder of Pawan Hans at NCLAT before taking a decision whether the PSU will be handed over to the private player or fresh bids would be invited, Business Standard reported last week. The next hearing of the case is on September 1.