Battle for Essar Steel: Numetal may move tribunal ahead of lenders' meet

In anticipation of a rejection of its financial bid, Numetal is likely to move the tribunal ahead of the next meeting of the committee of creditors (CoC) for Essar Steel.

Legal sources close to Numetal said, an application would be filed before the CoC meeting. “It could be filed either in the NCLT or NCLAT. If the CoC meeting is held on Friday, then it could be filed Thursday or Friday. However, if the meeting is shifted then the filing may also be postponed,” they indicated. “We believe that the CoC is preparing for a fresh round of bids and will be rejecting the first two bids on commercial terms at its next meeting on without going into the issue of eligibility. We want our rights to be protected. We will file an application seeking a declaration of our eligibility and guidance on cure,” they said. 

The NCLT Bench in the Essar order recently had remanded the first bids — from Numetal and ArcelorMittal — back to the resolution professional (RP) and the CoC with a direction to place all the resolution plans before initiation of fresh bids for consideration of the CoC, in the light of statutory provisions pointing to a 30-day cure period for payment for overdue, in the case of resolution applicants found to be ineligible under 29A (c). 

Section 29A (c) bars a promoter of a non-performing asset for more than a year from submitting a resolution plan.

Legal sources close to Numetal said if the bids were rejected on commercial terms then the 30-day cure period could be circumvented. “However, they would have to provide grounds as to why they are rejected even if it is done on commercial terms. If both the bids are higher than liquidation value, then they would have to provide grounds for rejection,” they said. 

It is not clear whether ArcelorMittal is also weighing legal options, but sources close to ArcelorMittal said: “At present, we see no basis for fresh bids. The order was quite clear that the CoC should review the bids and the bidders should be given 30 days to cure.”

The NCLT Bench had observed that mere sale of shares and declassification by ArcelorMittal would not absolve them from their responsibility and pointed to payment of dues for Uttam Galva Steels and KSS Petron, NPAs for more than year, as a cure. However, it asked the CoC to take an independent view on the issue of eligibility. 

Incidentally, Uttam Galva Steels case was scheduled for hearing before the Mumbai Bench of the NCLT but did not come up for hearing. The next date for hearing is June 6.

The financial bids in the first round were opened at the marathon CoC meeting held on Tuesday and sources said that ArcelorMittal’s bid was higher than Numetal’s. However, no decision on eligibility or fresh bids was taken. The next meeting was slated for April 27. 

 On Wednesday, ArcelorMittal India in a tweet said: “It can only be a positive development for the stakeholders of ESIL that the bids have now been opened as this is a critical step in identifying a strong, capable owner for the asset. We believe that, together with Nippon Steel & Sumitomo Metals, we are the most credible owner for ESIL, given our combined standing in the industry. We have submitted what we believe is an eligible, strong, and compelling bid. We believe it presents real value not just from a financial perspective, but also in terms of our long-term development plans for the asset.”

If Numetal does move the tribunal ahead of the CoC, it would not be a first by the company. On March 20, ahead of the crucial CoC meeting on March 21 where Numetal and ArcelorMittal were declared ineligible by the RP, Numetal had moved the Ahmedabad Bench of the NCLT on the basis of legal advice.

The NCLT Bench had issued a notice to the CoC through the RP. The NCLT had observed that any decision taken on resolution passed by the CoC in the meeting on March 21 would be subject to the outcome of the Numetal application.

The CoC meeting was held on March 21 and both Numetal and ArcelorMittal were found ineligible. It also decided to go for a second round of bids. Bids were invited from the shortlisted expressions of interest due to time constraint, and apart from Numetal who was partnered by JSW Steel and ArcelorMittal, Vedanta, submitted a bid. However, Numetal moved NCLT subsequently seeking a stay on the opening of the bids and the process remained stalled till the NCLT order, which said that the second round bids might have been prudent but not legally sound.