But the 33 per cent stake held by ArcelorMittal’s promoter, L N Mittal, in KSS of Kazakhstan, which, in turn, held 100 per cent in KSS Petron, which has non-performing assets (NPAs), would remain a concern, say lawyers.
“The RBI has made it clear that all the previous loan restructuring schemes are redundant and loan restructuring has to be done via the National Company Law Tribunal (NCLT) process only. Hence, it would be difficult for the State Bank of India to clear Uttam Galva Steel’s proposal for the one-time settlement in its present form,” said R S Loona, managing partner, Alliance Law.
Both Numetal and ArcelorMittal declined to comment on the lenders’ meet. The bids of both ArcelorMittal and Numetal will be formally rejected on Wednesday because both failed the eligibility test.
The ArcelorMittal bid was rejected because it had a 29 per cent stake in Uttam Galva, which is an NPA for more than a year. Though Mittal sold his 29 per cent stake to the Miglani family investment firm, just before Essar’s bids were submitted, it failed to clear the eligibility test. The Mittal investment in KSS Petron was also cited as a reason for its ineligibility despite Mittal selling its stake in KSS of Kazakhstan.
What are the options before ArcelorMittal? Lawyers said banks would allow all the five companies
which submitted the expressions of interest to bid. These are Nippon Steel, Tata Steel, Vedanta, Numetal, and ArcelorMittal. Lawyers said Nippon Steel, which partnered ArcelorMittal to bid for Essar Steel, can bid on its own. ArcelorMittal can also appeal to the NCLT against the rejection of its bid.
ArcelorMittal can wait for the changes in the IBC and the Clause 29A, which relates to defaulting promoters. It is reported that 29A will be changed in a way to allow more players.
According to the new definition, which would be announced shortly, any entity that was not part of the management of an NPA can apply.
As ArcelorMittal and L N Mittal were not managing the affairs of the two defaulting companies, Uttam Galva and KSS Petron, it will be allowed to bid for Essar Steel in the second round.