Workers of the employees union of Hindustan National Glass (HNG), which is currently undergoing debt resolution, have alleged that a massive fire at the company's Nashik plant in Maharashtra has benefited AGI Greenpac, a competitor that won the bid to acquire the company. The Industrial Safety and Health Department of Maharashtra's filings with the Chief Judicial Magistrate, Nashik said that their probe had found the fire fighting equipment was lying in scrap condition at the plant.
HNG is one of India's oldest and largest container glass-making companies with plants across India's various states. It has been undergoing corporate insolvency for nearly four years now and the process has been marred by several controversies and allegations of malpractices, where three former Supreme Court judges have opined that actions of the Resolution Professional (RP) Girish Juneja and Committee of Creditors (COC) were to favour AGI. HNG is under the management of the RP and COC since it entered the corporate insolvency resolution process (CIRP).
Emails sent to RP and members of COC on the matter went unanswered.
The Nashik plant employees have blamed Juneja and COC for their negligence after the fire incident. The petition by the workers filed with the Kolkata bench of NCLT (National Company Law Tribunal) states that despite there being Rs 300 crore in cash and bank balances of HNG, the RP and the COC have not undertaken repair and maintenance of the plant, which benefits competitors like AGI.
115 employees of HNG's Sinner plant in Nashik have filed a case with NCLT against RP Juneja and COC led by the State Bank of India. Prior to this, HNG's Pondicherry-based Nala Sangam Employees Union too made allegations against Juneja's actions. It said that they were living in the fear of a giant ageing furnace plant, the collapse of which due to lack of maintenance and repairs, could affect their livelihood.
The Nashik plant employees have told NCLT that the Sinnar plant of HNG contributed approximately 17 per cent to the company's total production, turnover and output and was running profitably until a fire broke out on December 29, 2023, resulting in leakage of molten glass from a furnace.
The petition alleges that the RP and the COC, who are responsible for the company, have been in gross negligence and have not even made formal attempts to investigate the fire incident. The employees have said in their petition that the fire also benefits AGI.
"There is apprehension that AGI Greenpac, as the resolution applicant, may be primarily interested in acquiring the plant's land and could potentially shut down HNG's plants post-acquisition, or effective date, as indicated in their own (AGI's) admission as recorded by the tribunal in its order dated April 28, 2023.
After the fire, the production and operation at the plant came to an abrupt halt leaving the workers without employment. The workers had appealed to the RP and the COC for immediate action and to conduct a thorough and precise assessment of the damages, promptly allocate necessary funds and initiate repair and renovations and maintain the status of the Sinnar plant as a going concern.
"AGI Greenpac, a notable competitor in the Glass market with a 20 per cent, is actively recruiting employees from the Nashik plant. This situation raises unfair competition practices and potential conflicts of interest. Strikingly, the respondents (RP and COC) have not opposed this, raising suspicion of a malicious intent on the part of the RP and the Sinnar unit head. Major demand and supply, which were being fulfilled by the Sinnar plant of HNG, is not being diverted to AGI Greenpac that has a factory in the south region, 400 kms away from the Nashik plant. AGI also has considerable market presence in Nashik and is now capturing the entire market of HNG post the fire incident," the employees have alleged.
Employees say that RP Juneja filed for the approval of the resolution plan without appropriately reporting the fire incident. "Lack of formal investigations and suppression of critical details by respondents (RP and COC) have raised concerns about transparency and accountability. (Also) the respondents' lack of opposition to AGI recruiting HNG workers post the fire raises suspicions of malicious intent," the petition states. A police complaint was filed against the RP and the head of the Sinner plant and authorities have issued show-cause notices too.
The petition has pointed out that HNG had substantial cash and bank balance to undertake repair and maintenance work of all the operational plants and furnaces. The petition states that HNG's cash and bank balances exceeded Rs 200 crores at the time of admission for the corporate insolvency resolution process in October 2021 and the same now stood at around Rs 300 crores. The employees state that the RP had started engaging with specialised glass agencies two months after the fire incident while repair and maintenance work at other furnaces remained unattended. It could affect the livelihood of 900 employees.
RP Juneja's actions under scanner
Three former judges of India's Supreme Court (SC) have picked holes in the insolvency process.
Justice Rohinton Fali Nariman, former SC judge, who is considered an authority in matters relating to commercial disputes, insolvency and arbitration, has opined that the resolution plan of AGI Greenpac for HNG is contrary to the law.
In the view of Justice NV Ramana, the former chief justice of SC, the RP's actions may have given an undue advantage to a party AGI. Justice Ramanna gave his opinion in June 2023.
"The actions of the RP have given an undue advantage to a bidder. In fact, considering there were only two bidders and since one already had (CCI) approval under the green channel under the date of submission of its final resolution plan, the decision taken by the RP was categorically only in favour of AGI being the only bidder who did not have a CCI approval," Ramana said.
Interestingly, Ramana also said that AGI's resolution plan would not have been eligible for voting in the first place since on the date of submission of the plan as well as voting, AGI did not have any application pending before the CCI. "Yet, the RP has reposed utmost confidence in the resolution plan of AGI. There is merit in the arguments that actions of RP were to give special preference to one bidder and the same ought to be examined by the NCLT under regulation 36 of CIRP and prevalent precedents," Ramana said.
"There is no doubt that the approval to the resolution plan of AGI by COC and the Adjudicating Authority would be contrary to law, in as much as, it is clear that AGI was declared a successful resolution applicant on 28 October, 2022, whereas conditional approval from the Commission (Competition Commission of India) was obtained only on March 15, 2023," Justice Nariman said in his opinion on the matter.
RP is said to have put AGI Greenpac's resolution plan to vote before the approval from CCI, which is mandatory as per the Bankruptcy Insolvency Code in such mergers.
RP even considered a conditional resolution plan by AGI.
In the opinion of Justice AK Sikri, the former SC judge, a conditional resolution plan cannot be said to be in compliance with the regulations of the Corporate Insolvency Resolution Process. Justice Sikri gave his opinion in August 2023 to the Nala Sangam Employees Union.
"The actions of the RP have given an undue advantage to AGI (one of the applicants) over remaining resolution applicants, especially INSCO. The prejudiced and partisan conduct of the RP can be seen from the following: The RP watered down the requirements under the RFRP (request for resolution plan) through email dated 25.08.2022 by allowing the CCI approval to be availed after approval of the plans by the COC but before application to the NCLT. The RP, contrary to his own decision communicated through email dated 25.08.2022, submitted the Resolution Plan of AGI, without there being any CCI approval on that date. It is noteworthy that AGI did not have any CCI approval on the following dates: On the date of submission of the Resolution Plan on 26.09.2022. On the date of CoC approval on 28.10.2022. On the date of application of AGI's Resolution Plan for approval before NCLT Kolkata," Justice Sikri said.
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