The Competition Commission of India (CCI) has approved the acquisition of debt-ridden Essar Steel by a consortium of ArcelorMittal and Japan’s Nippon Steel & Sumitomo Metal Corporation, but a legal expert has said that its nod is no indication of the sanction under the Insolvency and Bankruptcy Act (IBC).
ArcelorMittal is locked in a long-drawn court battle with Russia’s VTB Capital-backed NuMetal Mauritius for acquiring the bankrupt but prized steel company. ArcelorMittal recently upped its offer to Rs 42,000 crore against Rs 37,000 crore bid by Numetal but the matter is due in the Supreme Court over eligibility.
On Thursday, the Competition Commission of India tweeted that it has found no “appreciable adverse effect” on competition in respect of ArcelorMittal’s proposed acquisition of Essar Steel.
@CCI_India finds no appreciable adverse effect on competition in respect of ArcelorMittal and Nippon Steel & Sumitomo Metal’s proposed acquisition of Essar Steel
— CCI (@CCI_India) September 20, 2018
However, the Competition Law Practice expert at Indus Law, Avimukt Dar told FE Online, “The CCI approval is no indication of the sanction under the IBC.” He said that under the IBC, the CCI’s role is limited to assessing whether the proposed combination can result in an ‘appreciable adverse effect on competition’.
“The CCI has agreed to ‘fast track’ all combinations emerging out of the IBC process in order to ensure that the statutory timelines governing the IBC do not get impacted,” Dar added.
Essar Steel is among the first 12 big NPA accounts undergoing the IBC process and owes more than Rs 45,000 crore to lenders. Notably, ArcelorMittal’s Rs 42,000 crore offer also includes the Rs 7,000 crore court-mandated monetary obligation to repay the dues of Uttam Galva Steels, of which ArcelorMittal was once a promoter.
Both Numetal and ArcelorMittal were dropped initially under the Section 29A, which bars wilful defaulter, defaulter promoters and related parties/entities from acquiring other bankrupt companies under the IBC.
However, on September 7, the National Company Law Appellate Tribunal (NCLAT) ruled that the second round bids put in by Russia’s VTB Bank-based NuMetal and Vedanta for acquisition of Essar Steel are valid but the same of ArcelorMittal is contingent upon the company clearing Rs 7,000 crore dues of Uttam Galva and KSS within three days.
Numetal has challenged the decision to allow ArcelorMittal’s bid upon payment of dues in the Supreme Court. The apex court judgement is yet to come. Once the decision over eligibility is clear, the Committee of Creditors for Essar Steel will take the call on which bid to chose.