The committee of creditors (CoC) in the Essar Steel resolution
case met on Saturday and considered giving ArcelorMittal and Numetal seven days to clear outstanding dues to become eligible.
The CoC would, however, have to vote on the resolution to complete the process and notices to the companies would be issued thereafter, said sources close to the development. The voting could take place on Monday.
If the resolution goes through, ArcelorMittal would have to make payments on account of Uttam Galva
Steels and KSS Petron
to become eligible. Numetal, too, would have make payments to regularise the Essar account due to Rewant Ruia’s exposure in the consortium, even though it is a minority and indirect interest.
Numetal did not comment, but legal sources said that it was not liable. Neither was Aurora Enterprises, of which Rewant Ruia
is the ultimate beneficiary. In any case, Numetal had offered to drop Rewant Ruia, they said.
Lenders acknowledged that while the formalities were being followed in accordance with the order of the Ahmedabad Bench of the National Company Law Tribunal (NCLT), matters were complicated.
Numetal had moved the National Company Law Appellate Tribunal (NCLAT) against the NCLT
order on grounds that the order of the Bench suggesting a 30-day period for overdue payment for ArcelorMittal was not applicable to the company.
ArcelorMittal, too, had moved the NCLAT against observations made by the Ahmedabad Bench and to set aside its disqualification. Both the pleas would be heard on May 17.
Bench had remanded the first round of bids in Essar back to the resolution professional and the CoC for consideration and rendered the second round of bids legally unsound.
In the case of ArcelorMittal, the Bench had said that the sale of shares and declassification did not absolve them from responsibility and pointed towards payment of overdue amount for Uttam Galva
and KSS Petron
as a cure.
In line with the NCLT
order, last Wednesday, ArcelorMittal and Numetal were invited to make presentations before the CoC on their eligibility.
Sources close to ArcelorMittal subsequently indicated that it would consider making repayment of dues on account of Uttam Galva
and KSS, if required, as a “goodwill gesture”. The dues could be around Rs 70 billion. So far, ArcelorMittal has offered Rs 53 billion to banks on account of Uttam Galva, subject to reconciliation.
ArcelorMittal has emerged the higher bidder in the first round of bids. Numetal, though, has subsequently offered to match and better ArcelorMittal’s offer, provided lenders did not consider ArcelorMittal’s offer.
Sources close to the development anticipate a spate of litigation. Lenders were also keen on opening the second round of bids, an idea that was discussed on Saturday. But that too could be challenged by any of the bidders in the first round.
In the second round of bids, Vedanta had joined the fray, while JSW Steel had partnered Numetal. Vedanta recently wrote to the CoC for consideration of its bid in the interest of maximisation of value.
The resolution professional, based on legal advice, had rejected ArcelorMittal and Numetal on grounds of eligibility and called for a second round of bids.
ArcelorMittal sold its stake in Uttam Galva
and L N Mittal in KazStroyService (KSS), two companies that were classified as non-performing assets for more than a year, ahead of the bid for Essar. However, ArcelorMittal was deemed ineligible because it was a promoter of Uttam Galva
in the records of stock exchanges.
Numetal was disqualified by the resolution professional on grounds of eligibility because Rewant Ruia, son of Ravi Ruia, was the ultimate beneficiary of Aurora Enterprises, one of the shareholders of Numetal. Ravi Ruia is the promoter of Essar Steel. The NCLT
in its order said that the Essar Steel’s resolution professional had not placed the resolution plans of both the companies before the CoC for consideration before rejecting them on grounds of violating Section 29A of the Insolvency and Bankruptcy Code.