In a major twist, the Ahmedabad Bench of the National Company Law Tribunal (NCLT) on Thursday asked the resolution professional (RP) and the committee of creditors (CoC) of Essar Steel to reconsider the first round of bids and review offers from ArcelorMittal and Numetal.
The NCLT order rendered invalid the second round of bidding held on April 2. While Russia’s VTB-backed Numetal Mauritius and ArcelorMittal India were the only two bidders in the first round held on February 12, Vedanta, which had joined the race in the second round, will be out of the bidding process now. The fate of the other new entrant, 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.
Reading from the operative order, a 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.
What the NCLT order means
- Blow to Vedanta and JSW, which participated in the second round of bidding
- 270-day deadline to resolve insolvency extended by a month
The NCLT Bench also excluded the period from March 20 to April 19, the day of the order, from the mandatory 270-day window of the insolvency process, as laid out by the IBC. With this, the deadline now stands extended by a month.Of the six participants submitting expression of interest (EoI) in October 2017, only Numetaland ArcelorMittal had submitted bids in the first round.
However, on March 20, Russia’s VTB-backed Numetal had moved the NCLT to reinforce its bid made on February 12. 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, even though it had sold its shares, whereas Numetal’s bid was rejected because the defaulting company Essar Steel’s promoter family member Rewant Ruia’s offshore trust was holding 25 per cent shares in Numetal and as a result became the beneficiary.
Both ArcelorMittal and Numetal issued statements appreciating Thursday’s order. An ArcelorMittal spokesperson said, “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.” The statement added ArcelorMittal, in partnership with Nippon Steel & Sumitomo Metals, was the most credible bidder for Essar Steel and would bring considerable value to the Indian 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,” the European steel major said.
The Numetal spokesperson said, “We welcome the order pronounced by NCLT Ahmedabad by returning the matter back to the CoC for considering our original bid.” The statement added 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 Rs 450 billion. The State Bank of India-led consortium of lenders has a 93 per cent share of the total outstanding by Essar Steel.
After the Gujarat High Court, on July 17, 2017, disposed of Essar Steel’s petition against insolvency proceedings initiated by its lenders, the NCLT 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.
Source: Business-Standard