Essar Steel: Numetal, ArcelorMittal defend their bids

NuMetal and ArcelorMittal, both in the race to acquire bankrupt Essar Steel, defended their positions before the Ahmedabad bench of the NCLT today over their disqualification in the first round of bidding claiming that rules have been followed before submitting their bids.

After taking into consideration the views by both the appellants during the hearing, the tribunal, comprising adjudicating authority Manorama Kumari and Harihar Prakash Chaturvedi, posted the matter for further hearing tomorrow.

The case pertains to the lenders disqualifying ArcelorMittal's and NuMetal's -- the only two bidders for the crippled 10-million tonne Essar Steel at Hazira in Gujarat that owes more than Rs 45,000 crore 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.

Appearing for NuMetal, senior counsel Mukul Rohatgi stressed that the rejection of ArcelorMittal from the first round of bidding was appropriate under Section 29A of the IBC which deals with the disqualification.

Rohatgi further told the bench that the whole idea behind the IBC is that to keep away willful defaulters.

"As per section 29A, a person who intends to buy (a stressed) firm should not be a defaulter in the past, unless you wash your sins first" said Rohatgi.

He said ArcelorMittal had a joint venture with Uttam Galva with 29 per cent stake and that firm went NPA in 2016 with around Rs 6,000 crore of dues, and has not yet paid neither before the first bid date of February 12 nor before the second bid date of April 2.

"The bidder was a co-promoter of Uttam Galva for 10 years. Thus, you have to pay the debt if you are a promoter of an NPA company. The law is simple. So, disqualification of ArcelorMittal must continue" he said.

Maintaining that ArcelorMittal was rightly disqualified, Rohatgi also said ArcelorMittal was in management control of another NPA firm KSS Petron. "You can't walk in like an innocent purchaser. Past will haunt you. ArcelorMittal did not pay then, nor now" he said.

He said though the BSE declassified ArcelorMittal as a promoter of Uttam Galva only in the last week of March, following which the company was allowed to bid in the second round, "law does not allow such dubious method. Only way to remove the taint is that the debt is paid."