NCLAT says firm can ‘remove its stains’ if found ineligible to bid; rival Numetal lacks this comfort.
ArcelorMittal, which is one of the two key contenders for the bankrupt Essar Steel, told the National Company Law Appellate Tribunal (NCLAT) on Wednesday that it will pay Rs 7,000-crore dues of Uttam Galva and KSS Petron in case the appellate tribunal finds its first round of bid to be ineligible. Currently, the company has transferred the amount into a State Bank of India escrow account.
The submission regarding payment was made by ArcelorMittal’s counsel Abhishek Manu Singhvi when the NCLAT bench headed by its chairman SJ Mukhopadhyay observed that the company may get an opportunity to “remove its stains” in the event its bid was found to be ineligible due to non-payment of dues. However, the bench said that for rival bidder Numetal such a chance was not available. “It is either eligible or ineligible and has no chance for removing its stains. We can’t make them eligible if they are found ineligible,” the bench said.
The NCLAT completed the hearings on the matter on Wednesday and has reserved its order in the matter. It asked both the parties to submit their written submissions, if any, by Monday.
Earlier on May 22 it had ordered status quo on the insolvency of Essar Steel for two months as it admitted petitions of Numetal and ArcelorMittal over the bidding eligibility.
Numetal and ArcelorMittal had filed petitions in the NCLAT challenging the disqualification of their first round of bids by the resolution professional.
Both the companies put in bids in the second round after their offers in the first round were seen as invalid. Numetal faced disqualification as its 25% stake was owned by Aurora Trust of the Ruia family, the promoters of Essar Steel, while ArcelorMittal’s first bid was rejected because of it holding shares in loan defaulting companies Uttam Galva Steel and KSS Petron.
For the second round of bidding, Russia’s VTB Bank, which led the Numetal consortium, sought to sever ties with the Ruia family by buying out Aurora Trust’s stake in Numetal. ArcelorMittal transferred Rs 7,000 crore to an escrow account of SBI to clear outstanding loans of Uttam Galva and KSS Petron. In the second round of bidding, Anil Agarwal’s Vedanta Resources also joined the race and JSW Steel joined Numetal for the bid.
However, the Ahmedabad bench of the National Company Law Tribunal, in an order on April 19, said that inviting second round of bids without offering bidders an opportunity to rectify their first bids was “prima facie invalid”. It directed the resolution professional and the committee of creditors to reconsider the bids in the first round, and granted an additional 30 days for the resolution process and suggested that the two bidders be allowed an opportunity to rectify their bids to make them eligible.