The NCLT ruling due this week on Essar Steel bankruptcy resolution is being touted as the big test case for India’s nascent Insolvency and Bankruptcy Code. The NCLT (National Company Law Tribunal) is expected to give its final judgement by 31 January on resolving one of the marquee cases to be admitted under the IBC, in which Lakshmi Mittal’s ArcelorMittal emerged as the winning bidder for buying bankrupt Essar Steel.

ArcelorMittal is keeping its fingers crossed, as there is still a possibility of Essar Steel promoters Ruia family entering back into the game. Ruias had upset the matters by offering to pay Rs 54,390 crore to the lenders, in exchange for regaining control of Essar Steel, topping ArcelorMittal’s Rs 42,200 crore bid.

Potential challenge to ArcelorMittal

All eyes are on whether Ruias are allowed back into the resolution process by accepting their bid, potentially throwing yet another challenge to ArcelorMittal. While the current IBC framework does not allow the promoters to regain control of the company nor participate in the resolution process, there are yet a few cases in which the promoters can be entertained, according to a senior lawyer.

  • UPDATE: NCLT rejects Essar Steel promoters’ plea to repay Essar Steel debt

Section 12A of the IBC allows withdrawal of the resolution application by those who initiated the process, before the issuance of Expression of Interest. In certain cases, if the promoters offer to clear outstanding dues, and manage to convince 90% of the creditors in the CoC (committee of creditors), then the resolution process can be withdrawn from IBC, Punit Dutt Tyagi, Executive Partner, Lakshmikumaran & Sridharan, told Financial Express Online.

No cakewalk for Ruias either

However, while the case is keeping ArcelorMittal on toes, it won’t be a cakewalk for Ruias either. “If Essar promoters are allowed to come back into the process on the back of their offer of repaying 100% of the debt, then they would be required to show where the money is,” Tyagi said. “They would need enough to pay off the creditors, as well as show that they have sufficient funds and resources available to run the operations of the company,” he added.

Nevertheless, the process may be delayed further with acceptance of Ruias’ bid, with the case already been dragged on for over 500 days. “It’s possible for this case to go back to the CoC if Essar promoters come up and show where the money is, but before that the intent of the promoters needs to be accepted by the adjudicating authorities,” Tyagi said, adding, “The NCLT has to decide if the promoter has serious intent of paying up or they are just putting spokes in the wheel.”