Insolvency: NCLAT puts on hold resolution process for Essar Steel

Battle for Essar Steel: The NCLAT will be on a break from June 1 for a month
Kolkata: The National Company Law Appellate Tribunal (NCLAT) has put on hold the resolution process for Essar Steel.

The appellate tribunal has asked the resolution professional, Committee of Creditors (CoC) and the National Company Law Tribunal (NCLT) to refrain from passing any order in the matter related to the insolvency resolution of Essar Steel, including liquidation. 

The stipulated 270-day deadline for resolution under the Insolvency and Bankruptcy Code (IBC) for Essar Steel ended on April 29. However, the NCLT Ahmedabad Bench had excluded the period when the application was filed in the tribunal and the order was pronounced. The revised deadline was May 28. 

The next date of hearing in the NCLAT has been set for July 23, after which it will be heard on a daily basis. 

The NCLAT will be on a break from June 1 for a month. 

The appellate tribunal on Tuesday heard brief submissions from ArcelorMittal and Numetal. Mukul Rohatgi, representing Numetal, pleaded for the opening of the second round of bids. Harish Salve, appearing for ArcelorMittal, said the bids submitted in the first round should be considered and the company had already transferred Rs 70 billion into an escrow account in State Bank of India.

The CoC had given Numetal and ArcelorMittal seven days to clear outstanding dues on account of defaulting firms, in line with the order of the NCLT. Both Numetal and ArcelorMittal had challenged their disqualification in the first round of bidding by the resolution professional. 

Numetal was disqualified due to Rewant Ruia's exposure in Numetal. Rewant Ruia is the son of Ravi Ruia, who is promoter of Essar Steel.  

ArcelorMittal was disqualified because although it had sold shares in Uttam Galva, a non-performing asset for more than a year, before the submission of its bid for Essar Steel, it remained a promoter in the records of stock exchanges at the time of the bid. The NCLT, in its order, remanded the first round of bids to the resolution professional and the CoC for reconsideration and pointed towards the payment of overdue amount as a cure for ineligibility.

The CoC, in line with the NCLT order, had given both Numetal and ArcelorMittal seven days to clear outstanding dues on account of defaulting firms. Numetal, however, challenged in the NCLAT the demand to seek payment on account of Rewant Ruia's exposure in the consortium, even though it was an indirect and minority holding. 

Numetal also appealed against the NCLT order suggesting a 30-day cure period for ArcelorMittal for the purpose of payment of the overdue amount, as well as its own disqualification. 

ArcelorMittal has parked Rs 70 billion in an escrow account in State Bank of India. The offer is subject to the company being declared an eligible and successful bidder by the NCLT. ArcelorMittal’s offer is on account of its links with Uttam Galva and KSS Petron. Both firms were classified non-performing assets (NPAs) for more than a year.

ArcelorMittal has also appealed against the NCLT’s observations. All the cross-appeals have been admitted in the NCLAT. 

While the stay is on in Essar Steel’s resolution process, Uttam Galva, which is facing insolvency proceedings, will come up for hearing before the NCLT Mumbai Bench on June 6. Lenders were likely to seek an extension there as well, sources said.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel