The National Company Law Appellate Tribunal (NCLAT) ruled on Friday that Numetal's second bid to acquire debt-laden Essar Steel was valid and directed ArcelorMittal to clear its dues on account of defaulting firms by September 11 to be an eligible bidder, in what appears to be a blow to the LN Mittal-led company.
The appellate tribunal said ArcelorMittal India had made a conditional deposit of Rs 70 billion in its own current account (escrow account), which did not qualify as a payment of the due amount. An offer to repay the debt could not be accepted till it complied with the proviso to Clause (c) of Section 29A unconditionally, the NCLAT order said.
The stigma of classification of the account as non-performing asset (NPA) would continue to be levelled against the promoters of Uttam Galva and KSS Petron, even after the divestment of shares, till the dues were cleared, the order noted.
Section 29A (c) of the Insolvency and Bankruptcy Code debars the promoters of an NPA for more than a year from submitting a resolution plan, and the proviso to Clause (c) says a person shall be eligible to submit a resolution plan if payment of all dues with interest is made before the submission of resolution plan.
ArcelorMittal said it would review the order before determining its next step.
A spokesperson for Numetal welcomed the judgment.
“This vindicates Numetal's conviction that it is an eligible bidder and has given a compelling offer to the creditors for Essar Steel’s resolution under the IBC (Insolvency and Bankruptcy Code). Numetal welcomes the judgment of the NCLAT bench and reiterates its faith in the judicial system of the country,” the spokesperson said.
Numetal has offered Rs 370 billion in its second bid for Essar Steel, which owes lenders around Rs 490 billion and is undergoing insolvency proceedings. ArcelorMittal’s second offer is not known. Bids, however, might be revised as the NCLAT order has left scope for negotiations.
The order said if ArcelorMittal deposited the amount in the accounts of Uttam Galva and KSS Petron within the given time, then the committee of creditors would consider its resolution plan along with other offers, including the one submitted by Numetal on March 29, 2018. If necessary, the lenders may negotiate with the resolution applicants, it said.
In the second round, Numetal had dropped Aurora Enterprises, of which Rewant Ruia is the ultimate beneficiary, to become eligible to bid. Rewant Ruia is the son of Ravi Ruia, a promoter of Essar.
Numetal was also joined by JSW Steel as an investor in a step-down subsidiary in the second round. Vedanta, too, had submitted a resolution plan. Vedanta Resources Chairman Anil Agarwal told television channels on Friday that it welcomed the NCLAT judgment and would leave it to the process to decide the highest bidder.
ArcelorMittal was disqualified on technical grounds because it had sold its shares in Uttam Galva prior to the submission of bid but continued to be a promoter of the company in the records of the stock exchanges. Numetal was disqualified on grounds of Rewant Ruia’s exposure in the consortium. However, both parties challenged their disqualification before the NCLT Ahmedabad bench.
In line with the Ahmedabad bench order of the National Company Law Tribunal (NCLT), lenders had given the two bidders time to "cure" their ineligibility.
ArcelorMittal had made a conditional offer to lenders that it would have to be declared a successful and eligible bidder for Essar and parked Rs 70 billion in an overseas branch of an SBI account. Numetal moved the NCLAT to challenge the 30-day cure period offered to ArcelorMittal. The NCLAT on Friday directed the adjudicating authority to exclude the period the appeal was pending before the appellate tribunal, that is, from April 26 to September 7, 2018 for the purpose of counting the total period of 270 days.