Mumbai: Bankers to Essar Steel Ltd may consider extending the deadline for signing binding agreements with resolution applicants when it meets next week, two people close to the development said on condition of anonymity.

The committee of creditors led by State Bank of India (SBI) is considering the extension following recent changes in the Insolvency and Bankruptcy Code (IBC) which would require a thorough due diligence of bidders to assess their eligibility.

The deadline for a binding agreement is fixed by the resolution professional and approved by the committee of creditors. The deadline for Essar Steel ends in the last week of December, said one of the two people cited above, both of whom spoke on condition of anonymity.

According to the bankruptcy code, the resolution process should be completed within 180 days, which can be extended by another 90 days with the approval of the National Company Law Tribunal (NCLT).

At least four bidders—Nippon Steel, Tata Steel Ltd, Vedanta Resources and ArcelorMittal—have completed their due diligence on Essar Steel, said the person cited above.

“The resolution professional, however, needs to reconsider their eligibility keeping in mind the changes made by the ordinance to the insolvency code," said the second of the two people.

Emails sent to ArcelorMittal, Nippon Steel and Vedanta Resources did not elicit any response. Satish Kumar Gupta of Alvarez and Marsal (A&M) has been appointed as the resolution professional for Essar Steel. A&M declined to comment on the issue.

“As a process, we do assess and evaluate various strategic opportunities for growth. This is an ongoing process in the company," a Tata Steel spokesperson said, without giving details.

The ordinance issued in late November bars not only wilful defaulters, but also several other categories of investors such as guarantors to the debtor, those with loans classified as non-performing assets for at least a year, those convicted of any offence with a prison term of more than two years, directors in companies that have been disqualified, entities barred by the capital markets regulator, those who have been found to have struck fraudulent transactions with the firm, and connected entities.

A government panel headed by Injeti Srinivas, secretary in the corporate affairs ministry, has also invited comments from stakeholders to identify issues impeding the efficiency of the IBC resolution and liquidation framework. Suggestions will be accepted till 10 January 2018.

After the amendments, it is not clear if the current applicants are eligible or not, said the second person cited earlier. “For instance, if ArcelorMittal will be considered eligible for bidding as it holds stake in distressed Uttam Galva Steels is not clear," he said, adding that since the binding agreements will be delayed, finalization of the resolution plan will also be affected as a spillover effect.

Uttam Galva Steels has been classified as a non-performing assets by banks. ArcelorMittal which holds over 29% stake in the firm may thus become ineligible for bidding.

The Ahmedabad bench of the NCLT admitted the insolvency plea against Essar Steel in August. The resolution professional had asked the resolution applicants to submit expressions of interest by 23 October.

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