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The resolution process of stressed Essar Steel is headed for another legal battle with ArcelorMittal set to approach the Supreme Court against a tribunal order granting conditional qualification to the Luxembourg company.
Essar Steel’s resolution professional has called for a meeting of the bidders and the Committee of Creditors on Monday.
On Friday, the National Company Law Appellate Tribunal (NCLAT), had ruled that ArcelorMittal was ineligible to bid for Essar Steel as it held shares in defaulting companies, Uttam Galva and KSS Petron. The NCLAT had given ArcelorMittal time till September 11 to settle the debt for these companies to qualify.
‘Unfair ruling’
However, ArcelorMittal reckons it has been given an unfair ruling as the NCLAT had green-lighted a rival bid from Numetal.
The tribunal accepted Numetal’s second round of bidding after Aurora Enterprises — owned by Essar Steel promoter Ravi Ruia’s son Rewant — sold its 25 per cent holding in the consortium to other shareholders Indo and TPE. Indo holds 34.1 per cent stake in Numetal; TPE 25.9 per cent; and Russia’s VTB-Bank-owned Crinium Bay, has 40 per cent.
“There is no provision in the Insolvency and Bankruptcy Code which permits an ineligible person to become eligible by selling or transferring its shares of the company whose accounts have been declared as NPA by banks,” sources in ArcelorMittal said.
“The sale of shares by Rewant Ruia had made Numetal eligible to bid for Essar Steel. By the same yardstick, ArcelorMittal should also be made eligible with the sale of its holding in defaulting group companies Uttam Galva and KSS Petron,” said a senior lawyer.
Assuming ArcelorMittal agrees to pay ₹7,000 crore, the sum that Uttam Galva and KSS Petron had defaulted on, he said the Committee of Creditors should consider the first round of bidding of ArcelorMittal along with that of Numetal and Vedanta.
Tribunal’s rationale
The NCLAT had observed that ArcelorMittal cannot deposit the defaulted money of its group companies in its own account and claim it as settlement for the defaulted amount. “Such deposit of amount in its own (ArcelorMittal) escrow account does not qualify as a payment of overdue amounts... A conditional offer to pay the overdue amount cannot be accepted…,” said the judgment.
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