The latest addition to the Insolvency and Bankruptcy Code (IBC) barring wilful defaulters, defaulting promoters and related persons from bidding during the insolvency resolution has swung into action as two bidders of Essar Steel — ArcelorMittal and Numetal Mauritius — are facing disqualification.
According to Bloomberg, which quoted unnamed persons privy to the matter, advisors have recommended disqualification of both bids under the Section 29A of the IBC as promoters of both companies have been reportedly involved in loan defaults in the past.
The Section 29A of the IBC was passed by Parliament in the Winter Session after it was introduced as an ordinance. The section bars wilful defaulters, promoters whose account has been classified NPA for over a year, any corporate debtor undergoing insolvency resolution, any person connected to any of the mentioned earlier, or the holding company, subsidiary company, associate company and related.
ArcelorMittal held stakes in Uttam Galva Steel, a company identified by the Reserve Bank of India in its second list of big defaulters for insolvency. Although ArcelorMittal sold its entire stake in Uttam Galva Steels to original promoters recently, they may not get relaxation as they continued as a promoter for more than 12 months after the account was identified as an NPA.
Similarly, L N Mittal, a promoter of ArcelorMittal, held stakes in KSS Petron Private Limited which was declared an NPA in 2015. L N Mittal sold his stakes the company just before bidding for Essar Steel.
Meanwhile, in case of Numetal Mauritius, Russia-based VTB investor group is a majority stakeholder, in which Essar Steel’s promoter’s Ravi Ruia’s son Rewant Ruia is a beneficiary. This may be considered as a ground for disqualification as well.
The lenders of Essar Steel will meet later this week to take a decision on the eligibility of the two bidders. The final decision will involve both the committee of lenders and the National Company Law Tribunal (NCLT). Both companies have maintained that they are eligible for the bid under the law.
In another insolvency case, JSW Group’s bid is also being reviewed legally under Section 29A. JSW Group is the sole bidder for Monnet Ispat, a company identified by the RBI for immediate resolution. According to media reports, promoter of JSW Group, Sajjan Jindal is the brother-in-law of Monnet Ispat’s founder Sandeep Jajodia. Lenders are seeking legal opinion on this family connection before proceeding with the deal. [Read full story]
First published on Tuesday, 20 February 2018, on www.financialexpress.com