Lakshmi Mittal's ArcelorMittal has moved a court against the rejection of its bid for bankrupt Essar Steel after resolution professional found them ineligible under the amended IBC law last week.
Lakshmi Mittal’s ArcelorMittal has moved a court against the rejection of its bid for bankrupt Essar Steel after resolution professional found them ineligible under the amended IBC law last week. “We have today proposed a legal challenge to the decision of the resolution professional in the court in Ahmedabad,” ArcelorMittal said in a statement.
The company maintained that their bid was fully eligible under the law as they sold their shareholding in Uttam Galva Steel and were no longer the promoter of the defaulter company before submitting the offer of Essar Steel. “The stock exchanges have confirmed that ArcelorMittal was declassified as a promoter of Uttam Galva,” ArcelorMittal said, adding that the firm believes that their bid for Essar Steel India was fully eligible.
The company said that their bid was deemed ineligible due to the technicality of still being a promoter of Uttam Galva on the stock exchange. Last week, the company’s offer for Essar Steel was rejected after RP (resolution professional) declared the bid ineligible under Section 29A of the Insolvency and Bankruptcy Code which bars wilful defaulters, defaulting promoters and related persons from the bidding process.
Both ArcelorMittal and its chairman Lakshmi Mittal held stakes in companies — Uttam Galva and KSS Petron Private Limited respectively — that were classified NPAs. However, before Essar Steel bidding, stakes in both companies were sold, but RP argued that their bid was ineligible as they continued as promoters for more than a year after they defaulted on their loans.
Along with ArcelorMittal, the bid submitted by Numetal Mauritius was also rejected that as the company has Rewant Ruia, the son of Essar Steel’s Ravi Ruia, as a beneficiary. The Committee of Creditors (CoC) for Essar Steel is now seeking fresh bids, the deadline for which is April 2. Both ArcelorMittal and Numetal Mauritius can re-bid for the company if they strip their relationship with defaulting companies and fully comply with Section 29A.
Meanwhile, JSW Group chief Sajjan Jindal has said that his offer for Essar Steel was not allowed for the re-bid as they did not submit the Expression of Interest the first time. He also lamented that it was the mockery of the IBC law to allow defaulting promoters to bid for Essar Steel just because they sold their shares, without taking a name.
Essar Steel is one the first companies identified by the Reserve Bank of India (RBI) for immediate resolution under the IBC law for its loan default of Rs 45,000 crore.