Essar Steel insolvency: Spirit of 29A must be upheld, says ArcelorMittal

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A day after JSW Group Chairman Sajjan Jindal made an oblique reference to L N Mittal-led ArcelorMittal by saying promoters of defaulting firms should not be allowed to bid for stressed assets only because they had sold their investments in the defaulting entities, the world’s largest steelmaker responded by pointing towards the “spirit” of Section 29A of the Insolvency and Bankruptcy Code (IBC).

The firm said, “We agree wholeheartedly with comments made in the Indian media that the spirit of 29A must be upheld. One should review statements made by the finance minister when the article was introduced. It makes clear that its purpose is to prevent previous defaulters from regaining control of the assets they have bankrupted at a haircut. Clearly, that has no relevance to ArceloMittal’s bid for EssarSteel.”

Finance Minister Arun Jaitley’s statements that ArcelorMittal is referring to on the amendment to the IBC was made during discussions in the Rajya Sabha. The minister had said that if the government did not have such a broad exclusion list, then the same people, related persons, who ran the company to the ground would come back to buy the stressed asset at a 40-50 or 60 per cent discount.

The government had hence introduced Section 29A to debar existing promoters from bidding. However, the person will be eligible to submit a resolution plan if he/she makes payment of all overdue amounts with interest and charges relating to the non-performing asset (NPA) accounts before submission of the plan.
On Monday, Jindal said on the sidelines of a press conference, “In the spirit of the law, it is not fair to allow promoters of a defaulting firm to participate. I will be surprised if that kind of a thing is permitted.” 
He also said, “If the law itself is changed to allow a defaulter to bid, then it is fine. But when the IBC says that the promoter of a defaulter is not allowed to bid, and then that promoter cures himself by just selling the shares, then that is a mockery of the system.” ArcelorMittal had sold its shares in Uttam Galva, a NPA for more than a year, to make its eligible ahead of the bid for Essar Steel. Further, before submitting the resolution plan for Essar Steel, L N Mittal sold his personal shareholding in KazStroy Services (KSS) of Kazakhstan, an oil infrastructure provider company, which in turn had a 100 per cent stake in KSS Petron, which is facing insolvency proceedings. 

The Essar Steel rebid is on April 2. JSW had expressed interest in bidding for Essar Steel in the second round, but lenders had decided against allowing new bidders to join the fray in the rebid. Only those who have submitted expression of interest earlier can participate in the rebid.

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