 "Essar Steel")
Armed with legal opinion from top lawyers and Supreme Court judges, senior officials of Russia’s VTB Bank are visiting India next week to seek support for a bid to take over Essar Steel.
Numetal Mauritius, majority-owned by VTB, has made the bid. Essar Steel has also attracted an offer from ArcelorMittal, the world’s largest in the sector.
Essar Steel is undergoing bankruptcy proceedings at the National Company Law Tribunal (NCLT). It had it failed to repay dues worth Rs 440 billion.
According to a source, VTB officials will meet lenders, resolution professionals and government officials, on their investment plan. The bank and two other partners own 75 per cent stake in Numetal; the rest is owned by a Singapore-based trust. Rewant Ruia, part of the Ruia family (which runs Essar Steel), is the beneficiary of the trust.
Makram Abboud, head of VTB Bank's international business, would lead the delegation, also comprising lawyers. Numetal has taken legal opinion on its corporate structure and on ArcelorMittal's eligibility, after it came to light that the latter had till early this month a 29 per cent stake in Uttam Galva, a non-performing asset (NPA) for banks.
Lenders had raised queries over the stake held in Numetal by the trust of which a Ruia family member is the beneficiary, as well as on Uttam Galva stake held by ArcelorMittal. Both the offers have been sent for legal vetting by the Resolution Professional appointed, to the legal firm of Cyril Amarchand Mangaldas. A result on the bids is expected by March 5.
According to legal opinion taken by Numetal, the 25 per cent stake held by the trust will not disqualify the bid as any of the Ruia family members will hold any position in the company or have any say in the day to day business.
ArcelorMittal, on the other hand, goes legal opinions, is disqualified under Section 29A (C) of the Insolvency and Bankruptcy Code (IBC). It is not eligible to offer a resolution plan as it is a promoter of Uttam Galva, an NPA till it sold its shares early this month to the Miglani family at Re 1 a share. "ArcelorMittal’s own conduct establishes this, inasmuch as it is selling the equity share held by it in Uttam Galva only after the coming into effect of Section 29A," goes the legal opinion taken by Numetal from a former Indian government law officer.
By Section 29A (C), a promoter of a debtor who or which has been an NPA for at least one year before the commencement of NCLT proceedings against a corporate debtor is ineligible to offer a resolution plan.
ArcelorMittal has contended its bid for Essar Steel meets the eligibility criteria. Numetal lawyers say the only procedure provided for such a person to become eligible is by paying all the overdue amounts with interest and charges. The method adopted by Mittal to qualify by selling the 29 per cent stake in Uttam Galva is not a procedure prescribed under the Act, the former law officer said. "The stratagem adopted is a device to circumvent the mandate of 29A (c) of the IBC,” the lawyer argues.
