Tribunal said RP and CoC did not provide the applicants reasonable time to make payments of the overdue amount before disqualifying their bids
The National Company Law Tribunal (NCLT) found the option to invite fresh bids from all investors interested in Essar Steel to be more “sound”, “reasonable” and “legally transparent”, the order passed by the Ahmedabad bench of the NCLT on April 19 showed. In the order, the NCLT said that while it has sent back the matter to the committee of creditors (CoC) for reconsideration, the CoC may opt for the option to call for fresh bids from all interested investors. At a meeting of the CoC on March 21, the resolution professional (RP) Satish Kumar Gupta had suggested this option to the CoC, since the two bids it had received from ArcelorMittal and Numetal were thought to be ineligible under the Insolvency and Bankruptcy Code, 2016, information from the order showed.
This option was not considered to be viable and appropriate by the CoC keeping in mind the time constraints. The CoC, in turn, had called for a second round of bids from ArcelorMittal and Numetal. Meanwhile, both the companies had approached the NCLT seeking a declaration that they were eligible to submit a resolution plan for Essar Steel. “In our humble view such option seems to be more sound reasonable and legally transparent keeping in view the statutory change/amendment (that) took place in section 29 of the Code by inserting new clause i.e. Section 29 (A) in the code…,” the NCLT said in the order. “Therefore, we feel, while remanding back the matter to the CoC for reconsideration of the resolution plan and resolution applicant, the CoC may look to opt for option 1…,” it added.
The NCLT said the RP and the CoC did not follow the prescribed procedure of the IBC of providing the resolution applicants reasonable time (30 days) to make payments of the overdue amount and making their bids eligible, before disqualifying their bids. However, if the RP is to call for fresh bids now from all interested bidders, time constraint could be a major challenge, bankers said. Even though the NCLT has granted 30 days of additional time beyond the 270-day period that gets over by the end of this month, it might not be sufficient to call for fresh bids. In case one of the bidders is found to be ineligible in the new round of bidding, as per the IBC, the bidder will have to be given 30 days time to make itself eligible.
Numetal is understood to be ineligible because Rewant Ruia, the son of Ravi Ruia, is one of the ultimate beneficiaries and owners of a shareholder of Numetal through various holding companies and trusts. Ravi Ruia was the promoter of Essar Steel. With regards to the bid by ArcelorMittal, it is understood to be ineligible because of the company or its promoter’s shareholding in Uttam Galva and KSS Petron, each of which were NPAs for more than a year.