ArcelorMittal on Monday moved the Ahmedabad Bench of the National Company Law Tribunal (NCLT), challenging the decision to declare its bid ineligible and protect its “rights” in the face of the legal move by Numetal, the other bidder for Essar Steel.
Numetal had moved the NCLT on March 20, ahead of the meeting of the Committee of Creditors, to decide on the eligibility of the two bidders for Essar Steel. At the meeting, both ArcelorMittal and Numetal were found to be ineligible.
The LN Mittal-led company said it believed that its "strong and competitive" bid for Essar Steel, submitted on February 12, was fully eligible and therefore should have been placed before the Committee of Creditors by the resolution professional.
"However we received formal notification on March 23 that our bid was deemed ineligible due to the technicality of still being a promoter of Uttam Galva Steels on the stock exchange, even though we had sold our shareholding before submitting the offer. Furthermore, the stock exchanges have confirmed that ArcelorMittal was declassified as a promoter of Uttam Galva Steels. We have therefore today proposed a legal challenge to the decision of the resolution professional in the court in Ahmedabad. This is also critical in order to ensure we protect our rights in the process, given the legal challenge by Numetal against the decision," the statement from ArcelorMittal read.
The NCLT will hear the applications by ArcelorMittal and Numetal on Tuesday.
Numetal is seeking a declaration that it is eligible to submit a resolution plan for Essar Steel and is likely to be represented by Mukul Rohatgi.
The Committee of Creditors, after finding both Numetal and ArcelorMittal ineligible, called for a second round of bidding. Only those parties that had had submitted expressions of interest for Essar Steel in the first round will be allowed to rebid.
Legal advisers to the resolution professional were divided on ArcelorMittal's eligibility. One view was ArcelorMittal’s declassification as promoter of Uttam Galva from the stock exchanges would make it eligible.
ArcelorMittal had transferred its 29 per cent stake in Uttam Galva Steels, a company whose loans had turned into non-performing assets for more than a year, on February 7, ahead of the Essar Steel bid, to Sainath Trading Company. However, the change in promoter holding did not reflect in the records of the stock exchanges.
Numetal's bid was rejected because 25 per cent of its shares were owned by an offshore trust, with Rewant Ruia, a Ruia family member, as a beneficiary. The Ruias are the promoters of Essar Steel.
Since the meeting of the Committee of Creditors, ArcelorMittal has received approvals from the National Stock Exchange (NSE) and the BSE, respectively, for declassification as promoter of Uttam Galva Steels. The approval from the NSE came on March 21. However, it is not clear whether the declassification is with immediate effect. ArcelorMittal had approached the stock exchanges in the early part of March. Sources close to ArcelorMittal believed that it would be considered retrospectively since the shares were sold on February 7. If Numetal’s eligibility is upheld and a rebid is found to be unnecessary, the date of declassification is likely to assume importance.