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Essar Steel lenders to seek guidance from NCLAT on Mittal offer

Numetal and ArcelorMittal had moved the NCLAT against a previous order of the National Company Law Tribunal's (NCLT's) Ahmedabad bench

Dev Chatterjee  |  Mumbai 

Essar Steel

Lenders to will approach the (NCLAT) on Thursday to seek its guidance on the Rs 70 billion conditional offer made by They will also seek direction on whether to open the second round of bids for the bankrupt steel firm, in which Vedanta and JSW Steel had also participated.

Numetal and had moved the NCLAT against a previous order of the National Company Law Tribunal’s (NCLT’s) Ahmedabad bench for its observations on their first-round bids made in February.

Lenders said they would seek clarity from the tribunal on how to go forward with ArcelorMittal’s offer, which came with several conditions.

In February, and its chairman, L N Mittal, had de-classified themselves as promoters of and KSS Petron, respectively, to become eligible to bid for Under the IBC, the promoters of defaulting must first pay their dues to become eligible to bid for stressed assets.

Corporate lawyers said banks would not accept a conditional offer. “The conditional offer does not purge them (ArcelorMittal) of the ineligibility as they have to pay off the dues before their plan can be considered by the committee of creditors.

Secondly, they have now transferred their shares in Uttam Galva, so they will have to work out a structure with Uttam Galva and its promoters to pay their dues to banks in return for an equity or management stake, which may be a long-drawn process, more particularly since it is a listed company. Shareholders’ consent, Sebi takeover code, etc, may be relevant conditions precedent to payment of funds to Uttam Galva lenders,” said Alok Dhir of Dhir & Dhir Associates.

Dhir said it would be better for lenders to decide to cancel the first bid and go for evaluating the second round of bids to fulfil the object of the code for enhancement of value to the stakeholders.

There is precedent in other cases like Bhushan Power and where the NCLT allowed more bids so that banks can maximise their recovery.

On Wednesday, ArcelorMittal transferred Rs 70 billion to an escrow account of (SBI) owing to payment of outstanding dues relating to defaulting firms in a bid to become eligible for

This was after the bids of ArcelorMittal and its rival Numetal’s first round of bids were found ineligible by the resolution professional. ArcelorMittal was disqualified on grounds that it held a 29 per cent stake in Uttam Galva, which amounted to direct control in the defaulting company, while its promoter, Lakshmi Mittal, was holding a 33 per cent stake in KSS of Kazakhstan, which in turn held 100 per cent shares of KSS Petron, a bank defaulter in India, in his personal capacity, which amounted to negative control.

On the other hand, Numetal was disqualified on grounds that Rewant Ruia, son of Essar promoter, was beneficiary of a Trust, which held a 25 per cent stake in Numetal. Both the companies, however, had moved the Ahmedabad bench of the NCLT, which remanded the first round of bids to the resolution professional and the CoC for consideration and pointed to payment of dues, especially for ArcelorMittal, as a cure for its ineligibility.

ArcelorMittal has appealed against the observations of the NCLT. Numetal, too, has appealed, saying that the cure was not applicable to the company.

First Published: Wed, May 16 2018. 21:13 IST