In the Essar Steel insolvency matter, the bench observes tribunals are not supervisory authority to see what is happening, who was invited and who was not
The Supreme Court on Thursday said the National Company Law Tribunals (NCLTs) and the appellate tribunal should not entertain petitions by the concerned parties at every stage of the resolution process in insolvency cases as it causes delays. The apex court’s observation was that the tribunals should come into the picture only when the entire matter is settled by the concerned resolution professional (RP) and the committee of creditors (CoC).
The observation by the SC came as it continued its hearings in the matter where ArcelorMittal has appealed against the National Company Law Appellate Tribunal’s order relating to its eligibility to bid for the bankrupt Essar Steel by giving it three days to cure its bid of its infirmity. While NCLAT had approved the eligibility of the second round of bid put in by Numetal, it said ArcelorMittal first needed to clear dues of Rs 7,000 crore of firms it was previously associated with by September 11 to be eligible to bid.
A bench led by Justice RF Nariman observed that the role of NCLT and NCLAT should come only after the resolution process is finalised and their “jumping in” when the proceedings are going on before the resolution professional and CoC is like halting the process. “They are not supervisory authority to see what is happening, who was invited, who was not. The adjudicating authorities can look into the whole thing including if it is in accordance with the law after the resolution process is finalised,” the bench said. The bench agreed with senior counsel Harish Salve appearing for ArcelorMittal that directing the company to clear Rs 7,000-crore liability towards Uttam Galva and KSS Petron with which it was previously associated with was “wrong”. “Here everything is wrong, from top to bottom. Adjudication is wrong,” the bench observed.Hearing on the matter will now resume on September 18.
Salve said till the insolvency proceedings are being carried out by the resolution professional and CoC within the timeframe of 270 days, the adjudicating bodies should stay away. On the issue of paying Rs 7,000 crore of dues, he said there are “regulatory hurdles” as ArcelorMittal doesn’t own the companies concerned and therefore, a structure will be required for it to pay the dues. As is known, even Numetal on Wednesday had moved the SC challenging the three-day time given to ArcelorMittal by NCLAT to cure its bid of infirmities. Numetal’s petition states that there is no such provision under the Insolvency and Bankruptcy Code which allows three days to clear dues by defaulting bidders to become a qualified bidder. According to it, ArcelorMittal should have paid the dues before submitting its bids. The SC will hear its arguments on September 18.
After NCLAT’s order on September 7, ArcelorMittal increased its bid value for Essar Steel to Rs 42,000 crore to stay ahead of Numetal.
The RP and the CoC are waiting for the SC order to come in the matter before they decide their next course on the bids. ArcelorMittal and Numetal have been locked in a bitter battle for more than a year to gain control of Essar Steel, which is one of the first 12 companies to be referred to NCLT for insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). The company owes close to Rs 49,000 crore to it lenders, of which the State Bank of India is the lead banker.
The resolution professional, Satish Gupta for Essar Steel, has rejected the first round of bids submitted by both ArcelorMittal and Numetal for violating Section 29 A of the IBC that bars promoters of defaulting companies to bid for their assets at the NCLT, and had invited a second round of bids.
However, the Ahmedabad bench of NCLT had asked both the bidders to rectify their bids. It had stayed the opening of the second round of bids. The bidders had moved NCLAT against NCLT’s order. Numetal had asked for the second round of bids to be considered. Vedanta had also bid in the second round, and JSW Steel had expressed interest to partner with Numetal.
Numetal’s first bid was held to be ineligible by the RP 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 was considered a promoter of Uttam Galva Steels and KSS Petron, both defaulters. For the second round of bids, Numetal offered to replace the shareholding of Rewant Ruia.