Essar Steel bid: ArcelorMittal moves NCLAT

By: and |
Published: April 28, 2018 6:16:05 AM

On Friday, ArcelorMittal challenged the disqualification, saying it had exited from Uttam Galva, a defaulter company, before submitting a bid for Essar Steel on February 12.

The two-member NCLAT bench, led by justice SJ Mukhopadhaya, said it would hear both the appeals on May 17. The two-member NCLAT bench, led by justice SJ Mukhopadhaya, said it would hear both the appeals on May 17.

In what threatens to be a fierce legal tussle for control of Essar Steel, ArcelorMittal on Friday appealed against the disqualification of its bid for the bankrupt steelmaker by the resolution professional (RP) and the committee of creditors (CoC).

On Thursday, VTB-led Numetal had approached the National Company Law Appellate Tribunal (NCLAT) against an order by the Ahmedabad bench of the National Company Law Tribunal (NCLT) that gives ArcelorMittal a chance to clear its dues to banks and make it eligible to bid for Essar Steel. Numetal contended the bid cannot be given additional time to be rectified as it was received after Section 29 was added to the Insolvency and Bankruptcy Code (IBC). The amendment, which came into effect from November 2017, bars defaulting promoters from bidding for assets under the IBC.

The two-member NCLAT bench, led by justice SJ Mukhopadhaya, said it would hear both the appeals on May 17. The appellate tribunal issued notices to the ArcelorMittal, Numetal, the RP, lead banker State Bank of India (SBI) and the CoC, asking them to respond within a week.

On Friday, ArcelorMittal challenged the disqualification, saying it had exited from Uttam Galva, a defaulter company, before submitting a bid for Essar Steel on February 12.

In an order dated April 19, the Ahmedabad NCLT had asked the CoC as also the RP to reconsider the first set of bids received from Numetal and ArcelorMittal, granting an additional 30 days for the resolution process. The RP had called for a second round of bids but the tribunal had suggested the two bidders be allowed an opportunity to rectify their bids to make them eligible. The NCLT observed that inviting a second round of bids without offering bidders an opportunity to rectify their bids was “prima facie invalid”.

Numetal’s bid was held to be ineligible by the RP, Satish Kumar Gupta, on the grounds that Rewant Ruia, who is associated with the company, is the son of Ravi Ruia, a promoter of Essar Steel. The shareholders of Numetal include Russia’s VTB Bank and engineering firm Tyazhpromexport, financial investor Aurora Enterprises (in which Ruia has an interest) and commodity trading company Indo International Trading. ArcelorMittal’s bid was disqualified as it is a promoter of Uttam Galva Steels and KSS Petron, both defaulters.

The RP observed, “the resolution applicant was tested on the facts relating to two instances: i) KSS Petron and ii) Uttam Galva Steel’s, each of which were instances: performing assets) for more than one year”. Lenders to Essar Steel include SBI, Canara Bank, Punjab National Bank, IDBI Bank and ICICI Bank, among others. The company, which has a steel-making capacity of 9.7 million tonnes per annum, owes lenders close to Rs 50,000 crore to lenders.

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