NCLT directs Essar lenders to reconsider Arcelor, Numetal bids
21 April 2018
The Ahmedabad Bench of the National Company Lay Tribunal (NCLT) on Thursday said the second round of bidding for bankrupt Essar Steel held on 2 April is invalid and directed the resolution professionals and the committee of creditors (CoC) to reconsider the first round of bids and reconsider offers from ArcelorMittal and Numetal.
The NCLT order renders invalid the second round of bidding held on 2 April when Vedanta had joined the race. Vedanta will now be out of the bidding process while the fate of the other bidder, JSW Steel, which had acquired a 25-per cent stake in Numetal from a Ruia family trust just before the second round of bidding, will depend on whether ArcelorMittal and Numetal are given a chance for rectification.
Russia’s VTB-backed Numetal Mauritius and ArcelorMittal India were the only two bidders in the first round held on 12 February.
The two-judge Bench comprising Harihar Prakash Chaturvedi and Manorama Kumari observed that Essar Steel’s CoC and the appointed RP, Satish Kumar Gupta, “omitted to follow procedures” laid out in sections 29(A)(c) and 30(4) of the Insolvency and Bankruptcy Code (IBC).
“The RP and CoC’s decision to hold the second round of bids may sound prudent but is not legally sound. The RP and CoC are directed to reconsider their decision (to disqualify Numetal and ArcelorMittal),” the tribunal said.
The second round of bidding for Essar Steel was held ahead of the 270-day deadline to resolve insolvency.
The NCLT Bench, however, extended the deadline by a month by excluding the period from 20 March to 19 April, the day of the order, from the mandatory 270-day window for the insolvency process, as laid out by the IBC.
Of the six participants submitting expression of interest (EoI) in October 2017, only Numetal and ArcelorMittal had submitted bids in the first round.
However, on 20 March, Russia’s VTB-backed Numetal had moved the NCLT to reinforce its bid made on 12 February. Later, with the CoC disqualifying both the bids under Section 29A, ArcerlorMittal too moved the tribunal to challenge the disqualification.
The CoC had disqualified ArcelorMittal’s bid, stating that the company continued to be listed on the stock exchanges as a promoter of the defaulter Uttam Galva Steels, while it rejected Numetal’s bid as the defaulting company Essar Steel’s promoter family member Rewant Ruia’s offshore trust was holding 25 per cent shares in Numetal, making it the beneficiary (See: Arcelor Mittal, VTB face disqualification in Essar Steel bid: report). https://www.domain-b.com/companies/companies_a/Arcelor_Mittal/20180220_disqualification.html
Both ArcelorMittal and Numetal welcomed Thursday’s order. “We have always maintained that we are eligible to bid for Essar Steel and are pleased to see that the NCLT wants our offer to be presented to the committee of creditors,” an ArcelorMittal spokesperson said
ArcelorMittal, in partnership with Nippon Steel and Sumitomo Metals, was the most credible bidder for Essar Steel and would bring considerable value to the Indian steel industry, according to the companys spokesperson.
“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,” the spokesperson added.
“We welcome the order pronounced by NCLT Ahmedabad by returning the matter back to the CoC for considering our original bid,” the Numetal spokesperson said, adding that the firm had put forth a compelling resolution plan both industrially and financially.
“We hope our proposal will be considered by the CoC with a fair and holistic view,” the company said.
Earlier, the NCLT had admitted insolvency proceedings against Ruia-led Essar Steel, which has total debts of over Rs45,000 crore. The lenders consortium led by the State Bank of India (SBI) has a 93 per cent share of the total outstanding by Essar Steel.
The NCLT had earlier ordered dissolution of the board of directors of Essar Steel and appointed Satish Kumar Gupta from Alvarez & Marsal India as the resolution professional.
The Insolvency and Bankruptcy Code, 2016 allows 180 days to the RP to come out with a resolution plan for the company to repay the loan. The plan has to get approval from the committee of lenders with a 75 per cent majority before filing it with the NCLT. The maximum permitted time is 270 days for the plan to be filed for approval with the tribunal.