New Delhi: The Supreme Court on Thursday directed Numetal to clear all outstanding dues of not only Essar Steel Ltd but also bad debts of over one year of other Essar Group entities to be eligible to bid for the debt-laden steel maker.

ArcelorMittal was also allowed by the court to submit revised resolution plans for Essar Steel provided it clears debtor dues within two weeks. ArcelorMittal has to clear 7,000 crore dues of Uttam Galva Steels and KSS Petron. The two companies are required to submit their resolution plans in eight weeks thereafter.

ArcelorMittal’s bid has also been declared ineligible on account of non-payment of dues. It could not, however, be immediately ascertained if the bidding process will continue after Numetal settles all the dues. “Technically, lenders can withdraw the case against Essar Steel once the dues are cleared. There is not clarity on this as of now," said a lawyer close to the development on condition of anonymity. He further added that Numetal can file a revision petition.

Another lawyer involved in the insolvency proceedings said that it will be “nearly impossible" for Numetal to arrange the amount within two weeks. “The amount due for Essar Steel is around 42,000 crore which is huge," he said. A two-judge bench comprising justices R.F. Nariman and Indu Malhotra held the resolution plans submitted by ArcelorMittal and Numetal as ineligible under Section 29 A (c) of the Insolvency and Bankruptcy Code 2016 (IBC) which disqualifies a person who is a promoter or in control of a company whose account has been a non-performing account in India or overseas for more than one year.

It was further laid down the revised resolution plans of the two interested parties will be considered by the majority (66%) of the committee of creditors (CoC) and if it did not find merit in either of the proposals, then Essar Steel would go into liquidation. This would include Vedanta’s resolution plan.

The court also diluted the role of the adjudicating bodies—National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT) and said they would step in only after resolution plans were approved by the CoC.

On 7 September, NCLAT ruled that second-round bids of Numetal and Anil Agarwal’s Vedanta for acquisition of Essar Steel were valid but that of ArcelorMittal was contingent upon the company clearing 7,000 crore dues of Uttam Galva and KSS Petron within three days.

Anil Agarwal’s Vedanta Ltd is the third qualified bidder for Essar Steel, whose lenders had initiated insolvency proceedings for recovery of around 49,000 crore in dues. Numetal had sought clarification on a number of queries pertaining to loan defaults by companies owned by Pramod Mittal and Vinod Mittal, the brothers of L.N. Mittal, the promoter of ArcelorMittal. It was backed by VTB Capital that has also questioned the eligibility of ArcelorMittal in a letter addressed to the resolution professional and the CoC conducting the auction of Essar Steel to recover over 49,000 crore of unpaid loans to banks.

Numetal and steel tycoon Lakshmi Mittal-led ArcelorMittal had in February submitted separate bids to take over Essar Steel. The CoC, however, disqualified both bids, saying their promoters were tied to companies which were loan defaulters, and hence, they were ineligible under Section 29A of the IBC.

Numetal was disqualified on the grounds that Rewant Ruia, son of Essar Steel promoter Ravi Ruia, was a beneficiary of a trust that backed Aurora Enterprises, which held 25% in Numetal.

The second round of bids was called, in which JSW Steel joined Numetal to put in a bid of 37,000 crore, while Vedanta entered the fray as a third bidder. ArcelorMittal India, too, put in a bid.

Both Numetal and Essar Steel had challenged disqualification of the first round of bids in the Ahmedabad bench of the NCLT, which did not give any relief to bidders, but asked the CoC to take another look at bids before disqualifying them. The CoC had sought a second round of bidding by 2 April.

The NCLT order was challenged by both bidders in the NCLAT. After the NCLT order, ArcelorMittal offered to repay any outstanding loans of Uttam Galva, where it held the promoter’s stake, and KSS Petron. The steelmaker had placed 7,000 crore in an escrow account, with the condition that lenders disqualify Numetal’s bid.

Essar Steel has debts of 49,000 crore and was referred to the NCLT in June last year.

After the two firms were disqualified by the resolution professional under provisions of the IBC, which prohibits related parties of defaulting firms from participating in the resolution process, the two firms filed appeals before the tribunal.

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