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The Supreme Court has allowed both ArcelorMittal and Russian VTB Bank-promoted consortium Numetal Mauritius to clear their dues with banks in two weeks if they want to make themselves eligible to bid for the stressed assets of Essar Steel. The court has allowed the two companies to make fresh bids within eight weeks.
The ruling by Justices Rohinton Nariman and Indu Malhotra, on Thursday, makes the matter clear on ArcelorMittal’s bid but muddles the case for Numetal.
Decks cleared
In the case of ArcelorMittal, the key question was whether the company should pay dues of ₹7,000 crore owed by its former group entities, Uttam Galva and KSS Petron to their lenders. ArcelorMittal had argued that it had sold its stake in the two companies and therefore eligible to bid for Essar Steel. The company had put the due amount in an escrow account as a commitment to pay off the dues should its bid for Essar Steel is considered the winning bid.
The apex court has now ended this debate and has told the company to pay off the dues first if it wants to be eligible for acquiring Essar Steel.
Numetal in a soup
In the case of Numetal, the primary concern was the presence of Rewant Ruia as shareholder in the company. Ruia — being part of the promoter group family of Essar Group — was considered to be ineligible to bid for the assets. Subsequently, Numetal shareholders acquired the shares held by Rewant to be eligible. However, the apex court has now said that even if Rewant had sold his shares, Numetal is still not eligible to bid because the earnest money of ₹500 crore for submission of bid by Numetal was provided by Aurora Enterprises, a company owned by Rewant Ruia. “,,,the looming presence of Shri Rewant Ruia has been found all along, from the date of incorporation of Numetal, till the date of submission of the second resolution plan,” the court ruled. “Therefore, could it be said that Rewant Ruia had disappeared from the scene altogether, so as to obviate the application of Section 29A(c)? The obvious answer is no,” it added.
Options for Numetal
While Numetal did not comment on the court ruling, sources close to the company said that the court could be interpreted to mean that Numetal can become eligible to bid for Essar Steel only if it pays off all dues owed by the Ruia Group. This means that Numetal has to pay-off the entire Essar Steel default of ₹45,000 crore to make it eligible for bidding. But if it does so, then there is no need for this insolvency process itself because the outstanding debt would have been paid off by Numetal, said a senior lawyer requesting anonymity.
In this scenario, Numetal could make an out-of-court bid to acquire Essar Steel with Rewant Ruia’s interest intact. It will then be up to the lenders to decide if they want to continue with the bidding process under the insolvency process or settle it out of court.
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