Numetal said it would go with the original Essar SteelNSE 0.00 % bid consortium that had Rewant Ruia’s Aurora Enterprises as a stakeholder, while rival ArcelorMittal said it is “evaluating” the order that observed it must repay pending dues in defaulting firms where it had been a promoter to be eligible to bid for stressed assets.
The judge at the National Company Law Tribunal (NCLT) also said that a future option could include initiating a new bid process, keeping a window of opportunity open for the likes of JSW SteelNSE -0.94 % and Vedanta that had made their interests known in the second round of bidding.
Thursday’s NCLT order, a copy of which was reviewed by ET, directed the Essar Steel resolution professional (RP) and its Committee of Creditors (CoC) to “revisit/reconsider their decision”—which had earlier declared both bids ineligible – “in light of provisions of section 29(A) read with section 30 (4).”
“Numetal will stick to its original bid and wait for the CoC decision on its eligibility,” a legal source close to Numetal said on Sunday. “In case the CoC has any issue, it can be addressed through Numetal’s proposal to alter the composition of the consortium that was given while submitting the original bid,” the source added.
Numetal, led by Russia’s VTB Bank, had contested that Rewant Ruia is not connected to the default as per the Indian market regulator’s takeover code. Numetal argued that “Rewant Ruia should have been provided an opportunity to rebut such a presumption which was admittedly not provided. The RP has not provided any facts that would establish that Rewant Ruia is acting in concert with his father.” Rewant’s father Ravi Ruia is a co-promoter of Essar Steel, which is facing bankruptcy proceedings.
Interestingly, following the court order, JSW Steel, which had entered the race for Essar by joining the Numetal consortium replacing Aurora in the second round of bidding, said calling a fresh round of bids would be the fair for all parties involved.
Seshagiri Rao, joint MD of JSW Steel, told ET on Sunday: “The Judge’s observation that a fresh round of bids as suggested by RP to the CoC on March 21, with new expressions of interest and a new RFP within a limited time frame…. reiterates our view on this matter. This would also allow lenders to get a better value.”
ArcelorMittal, the other key player in the race for Essar Steel, said that it is “evaluating” the order. A spokesperson said: “We are currently reviewing the order and will comment further in due course as appropriate.”
Legal experts were of the view that the order may have implications for ArcelorMittal as it said: “In order to be eligible, overdue amounts in both the cases of KKS Petron and Uttam GalvaNSE 0.36 % Steels should be paid by ArcelorMittal before being eligible to bid as provided in Section 29 (A) itself.” It also observed: “Mere sale of shares and declassification as promoter after companies have gone into default cannot absolve them of responsibility.”
The judge also observed that “the CoC did not follow prescribed procedure to afford reasonable opportunity by making payment of overdue amount in order to remove such disability of the resolution applicant as prescribed under clause (3) of Section 29(A) of IBC and/or make good the disability.”
Industry experts were divided on whether Arcelor’s ‘disability’ was based on the status of its declassification as promoter of Uttam Galva on the date of submission of the Essar bid. In that case, the operative part of the court order would not be about repayment of dues of KSS Petron and Uttam Galva but that the CoC did not give ArcelorMittal an opportunity to “make good its disability.”
Numetal’s Stand
Rewant Ruia not connected to the default as per Sebi’s Takeover Code
Rewant Ruia should have been provided an opportunity to rebut such a presumption
The RP has not provided any facts that shows Rewant Ruia is acting in concert with his father
Source: Economic Times