New Delhi: ArcelorMittal India Ltd. was eligible to submit a bid for Essar Steel on the date of application as the company was till then no longer associated with Uttam Galva Steels Ltd., said lawyer Abhishek Manu Singhvi, appearing for ArcelorMittal on Monday.
The National Company Law Appellate Tribunal (NCLAT) was hearing arguments made by Singhvi challenging the disqualification of Arcelor Mittal’s bid by the insolvency resolution professional of Essar Steel Ltd. To be sure, a bid by Numetal Ltd has also been rejected.
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.
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’ll look at the disqualification from every aspect… Both of you (Arcelor Mittal and Numetal) have been ineligible, maybe both are ineligible or both eligible or any one is eligible."
According to Singhvi, Arcelor Mittal was holding 29% shares of Uttam Galva and it was “never involved in management" or “never appointed any director" of Galva.
He said its parent, ArcelorMittal Netherlands BV, had sold off the shares of Uttam Galva five days prior to submission of bids for Essar Steel. However, the sale of shares was reflected in the stock exchange after submission of bids. “It is not in my hands if the stock exchange takes two weeks to reflect it," said Singhvi during his arguments.
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 debts 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 grounds 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 Tuesday.