Ahmedabad: The fight for control of bankrupt Essar Steel Ltd took an unexpected turn with the Ahmedabad bench of the insolvency court setting aside the resolution professional’s decision to disqualify Numetal Mauritius and ArcelorMittal from the first round of bidding.
A two-judge bench of the National Company Law Tribunal (NCLT) in Ahmedabad on Thursday directed resolution professional (RP) Satish Kumar Gupta and the committee of creditors (CoC) to reconsider the bids of Numetal and ArcelorMittal for the distressed steelmaker, one of the 12 accounts shortlisted by the Reserve Bank of India (RBI) for immediate bankruptcy resolution in June last year.
The two bidders had challenged the RP’s decision to reject their bids. Gupta had disqualified the bids on the ground that they violated Section 29(A) of the Insolvency and Bankruptcy Code (IBC), which bars promoters of defaulting companies from submitting a resolution plan.
“The CoC and RP have not followed administrative rules as per 29 (A) (c) and 30 (4) of IBC code and the court directs RP and CoC to reconsider their decision for disqualification of the two entities," Harihar Prakash Chaturvedi, one of the two judges, said in the order.
The order invalidated the second round of bidding held on 2 April and extended by a month the 270-day deadline for the resolution process of Essar Steel that ends on 29 April.
The 2 April round of bidding saw participation from three entities: the combine of ArcelorMittal Netherlands NV-Nippon Steel and Sumitomo Metal Corp.; Vedanta Resources Plc.; and JSW Steel Ltd with Numetal Mauritius.
“ArcelorMittal in partnership with Nippon Steel and Sumitomo metals is the most credible bidder for Essar Steel and will bring considerable value to the India steel industry. We had made a strong and competitive offer backed up by a detailed industrial plan and now hope for a swift resolution for Essar Steel," ArcelorMittal said in a statement after the court order.
Numetal said it was happy that the CoC will now consider its original bid.
“We have put forth a very compelling resolution plan both industrially and financially. We hope our proposal will be considered by the Committee of Creditors with a fair and holistic view. We are awaiting the detailed order before we can comment further," Numetal said in a statement.
Both ArcelorMittal and Numetal, while contending in the tribunal that they were wrongly disqualified in the first round of bidding, had challenged each other’s eligibility in participating in the second round of bidding. The NCLT bench passed the order after multiple petitions and counter affidavits filed by Numetal and ArcelorMital.
The total debt of Essar Steel stood at Rs52,572 crore. Of this, Rs49,230 crore is financially admitted debt and Rs3,357 crore operational debt, Ravi Kadam, legal counsel for the CoC, told the tribunal. Essar Steel has a steel production capacity of 10 million tonnes per annum at its Hazira plant in Gujarat.
ArcelorMittal’s bid for Essar Steel faced disqualification for its stake in loan defaulter Uttam Galva.
ArcelorMittal, represented by Abhishek Manu Singhvi, said the company had sold its stake in Uttam Galva before the cut-off date for submitting the bids and hence there was no issue regarding its eligibility.
In the case of Numetal, one of the promoters of the special purpose vehicle, Rewant Ruia, son of Ravi Ruia, is related to the original promoters of Essar Steel and this had led to its disqualification.
Rewant Ruia is the beneficiary of a trust that backed Aurora Enterprises, which in turn held about 25% stake in Numetal during round one of bidding for Essar Steel. VTB is the largest shareholder with about 40% stake.
“Numetal is a body corporate and not a consortium. Hence, individuals cannot be taken into account unless they have management control. In this case, Rewant is not in control of Numetal and is only one of the shareholders of the entity,"said Janak Dwarkadas, the counsel for Numetal.
The lawyers for the RP had reiterated their stand for disqualification of the two bidders before NCLT.