Essar Steel case: Invitation of second round of bids invalid, says NCLT

In a major victory for Numetal and ArcelorMittal, the Ahmedabad bench of the NCLT today lenders and the resolution professional of the bankrupt Essar Steel to reconsider their first bids.

Pronouncing its order today, the National Company Law Tribunal (NCLT) adjudicating authority Manorama Kumari and Harihar Prakash Chaturvedi noted that certain provisions of the IBC were not followed by the committee of creditors and the RP while disqualifying both the bids earlier.

The bench asked the consortium of 31 lenders and the RP to reconsider the bids submitted by both Numetal and ArcelorMittal in the first round on February 12.

While sending the first bids once again to the CoC and the RP, the NCLT said certain provisions as mentioned in the section 29(a)(1) and in the sub-section 4 of section 30 of the IBC were not followed while disqualifying the first bids.

Both the petitioners, Numetal and ArcelorMittal, welcomed the verdict.

"We welcome the NCLT order returning the matter back to the creditors for reconsidering our original bid. We have put forth a very compelling resolution plan both industrially and financially. We hope our proposal will be considered by the CoC with a fair and holistic view," a Numetal spokeman said in a statement.

Similarly, ArcelorMittal said it has always maintained that it was eligible to bid for Essar Steel.

"ArcelorMittal, in partnership with Nippon Steel and Sumitomo Metals, is the most credible bidder for Essar Steel and will bring considerable value to the Indian steel industry. We had made a strong offer backed up by a detailed industrial plan and now hope for a swift resolution," it said in a statement.

Without elaborating much about the fate of the second round of bids submitted on April 2, which are yet to be opened, the tribunal observed that inviting the second round of bids at this stage is not required.

At the second round, these two along with JSW Steel and Vedanta had submitted the bids.

Numetal and ArcelorMittal had moved the NCLT over their disqualification in the first round of bidding claiming that rules had been followed before submitting their bids.

The case pertains to the lenders disqualifying the bids by ArcelorMittal and Numetal--the only two bidders for the crippled 10-million tonne Essar Steel at Hazira in Gujarat that owes more than Rs 450 billion to over 30 banks-citing technical issues on March 23 which primarily means their ownership structure.

These companies challenged the lenders' decision at the NCLT soon after they were disqualified. Following this, the NCLT allowed rebid till April 2, ArcelorMittal along with Nippon of Japan, Anil Agarwal's Vedanta and Numetal along with JSW Steel have put in bids.

These two bids were from the beginning questioned by the resolution professional and others as the promoters of both these firms were defaulters in other firms -- the Ruias in Essar Steel and the Mittals in Uttam Galva.NCLT's Ahmedabad bench said on Thursday that invitation of second round of bids for Essar Steel is invalid and that the Resolution Professional did not follow due procedure.

Both bids have to be shared, evaluated by Committee of Creditors before taking any decision, NCLT said.

The bench was pronouncing verdict on Numetal, ArcelorMittal's petitions challenging their disqualification in Essar Steel bids