Essar Steel has a debt of ₹49,000 crore and was referred to the NCLT in June 2017.
New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Monday sought an explanation from the insolvency resolution professional of Essar Steel Ltd for rejecting the first round of bids by Numetal Ltd and ArcelorMittal India Ltd.
During the hearing of the cross petitions filed by the two disqualified bidders, a two-judge NCLAT bench headed by justice S.J. Mukhopadhyay said: “We have to decide whether the decision of the resolution professional to reject the bids of the first round was good or bad. Also, whether the decision of the committee of creditors to call for a second round of bids was a good decision or not.”
ArcelorMittal could submit a resolution plan only after “clearing the overdue amounts of Uttam Galva Steels Ltd and KSS Petron Pvt Ltd and attach the receipts” of the transactions, argued Mukul Rohatgi, appearing for Numetal.
ArcelorMittal, in its petition, had challenged its disqualification on the grounds that it had exited Uttam Galva before submitting a bid for Essar Steel on 12 February. It also said that its parent, ArcelorMittal Netherlands BV, had offered to settle its debt and had transferred ₹7,000 crore in an escrow account maintained by the State Bank of India (SBI), so that it was eligible to bid for the debt-laden steel company. SBI leads a consortium of lenders to Essar Steel.
Backed by Russia’s VTB Capital, Numetal had also challenged an order that allowed ArcelorMittal to settle the bank dues of its associate companies to bid for Essar Steel.
Essar Steel has a debt of ₹49,000 crore and was referred to the NCLT in June 2017. After the two companies were disqualified by the resolution professional under Section 29(a) of the insolvency code, which prohibits related parties of defaulting firms from participating in the resolution process, the two firms had filed appeals before the tribunal.
On 19 April, NCLT had dismissed the first round of bidding for Essar Steel on the ground that the committee of creditors and the resolution professional did not follow the procedure prescribed under the insolvency code. However, it ruled that ArcelorMittal and Numetal must clear debts in defaulting companies where they hold stakes before bidding for Essar Steel.
Numetal was disqualified on the ground that Rewant Ruia, son of Essar Steel promoter Ravi Ruia, is a beneficiary of a trust that backed Aurora Enterprises, which in turn held a 25% stake in Numetal. VTB is the largest shareholder with a 40% stake. The matter will next be heard on 5 July.