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  1. Lenders may approach NCLT on bidders eligibility for Essar Steel

Lenders may approach NCLT on bidders eligibility for Essar Steel

The committee of creditors (CoC) to Essar Steel is likely to approach the National Company Law Tribunal (NCLT) regarding the bids received as part of the steelmaker's insolvency resolution process since both the bidders – ArcelorMittal and Nu Metal – are facing eligibility issues, sources told FE.

By: and | Mumbai | Updated: March 22, 2018 5:00 PM
NCLT, Essar steel, committee of creditors, ArcelorMittal, Numetal, State Bank of India, Reserve Bank of India, Mauritius, Rewant Ruia In August last year, the NCLT had appointed Gupta as the interim resolution professional (IRP) for Essar Steel. 

The committee of creditors (CoC) to Essar Steel is likely to approach the National Company Law Tribunal (NCLT) regarding the bids received as part of the steelmaker’s insolvency resolution process since both the bidders – ArcelorMittal and Nu Metal – are facing eligibility issues, sources told FE. According to sources, the lenders are not keen to select a bidder without getting clarity on whether the two companies are eligible to bid. “We are planning to approach the bankruptcy court to get the bids cleared before further action. While our legal experts can give us an opinion on the disqualification of the bids, only the NCLT can take a decision on that,” a banker said. Their eligibility is being questioned in context of the amendment to the Insolvency and Bankruptcy Code (IBC) which categorically stated that promoters of defaulting companies are not allowed to bid unless they repay all pending loans before submitting the resolution plan. While ArcelorMittal’s bid could face an eligibility test because of a stake it held in Uttam Galva Steel, a defaulter on banks’ books, Nu Metal’s bid could run into trouble since one of the persons associated with the company, Rewant Ruia, is related to the promoters of Essar Steel. However, both companies have taken measures to try and ensure that their bids are not declared void. For instance, ArcelorMittal has already sold its stake in Uttam Galva Steel, and Nu Metal, is a company established in Mauritius by parties having no direct connection with the Ruias of Essar group.

Bankers told FE on Wednesday that one of the firms, advising the CoC on the bids have expressed an opinion that the bids may not meet the eligibility criteria. “In such a situation, if the tribunal orders, it is likely that there will be a rebidding for the asset,” a banker said. An Nu Metal spokesperson said in a emailed response that the company was not aware of any such development from the lenders, the resolution professional or the legal advisors. “Numetal is a fully eligible resolution applicant and has submitted its resolution plan for Essar Steel,” the spokesperson said. An ArcelorMittal spokesperson said, “As we have previously said, we do not believe there is any legal basis under which ArcelorMittal would not be considered eligible to participate in the resolution process. ArcelorMittal was never the promoter of Uttam Galva. We had no board representation and no involvement in the management of the company even before selling our shareholding. ArcelorMittal is an internationally renowned, financially strong credit-worthy investor with an AA rating. We have invested successfully in many countries and developed a reputation for our ability to turn around distressed or underperforming assets. Section 29A of the IBC was not designed to prevent reputed, financially strong businesses, with no prior involvement with the asset in question from participating.” An email sent to State Bank of India (SBI), the leader of the CoC, did not elicit any response till the time of going to press. Satish Kumar Gupta, the resolution professional (RP) for Essar Steel did not respond to multiple calls.

Bloomberg reported on Tuesday that ArcelorMittal and Russia’s state-controlled VTB Group have hit a fresh snag in their pursuit of Essar Steel India. It said that advisers evaluating the offers for Essar Steel are recommending that all the bids be disqualified, citing people with knowledge of the matter. A committee of Essar Steel lenders will meet later this week to discuss the eligibility of the proposals, it added. Legal and accounting advisers expressed concerns to the interim resolution professional overseeing the sale about the eligibility of the offers from both ArcelorMittal and a rival VTB-led consortium, Bloomberg said, adding that the advisers’ opinion is meant as a guide, and there’s no certainty the bids will be blocked.

In August last year, the NCLT had appointed Gupta as the interim resolution professional (IRP) for Essar Steel. The company is among the 12 companies which the Reserve Bank of India (RBI) had asked banks to refer to the bankruptcy court. Essar Steel, which has a steel-making capacity of 9.7 MTPA, owes more than Rs 45,000 crore to lenders.

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