London-based metals group Liberty House will have to pay some $2.8 million it owes EXIM Bank to be allowed to bid for ABG Shipyard Ltd in a fresh round of bidding, the third, for the debt-laden shipbuilder.

The non-payment of dues was cited by EXIM Bank to oppose the lone resolution plan submitted by Liberty House, which, in turn, led the committee of creditors, led by ICICI Bank, to reject the bid under Section 29 (a) of the Insolvency and Bankruptcy Code (IBC) on Monday, officials briefed on the plan said, asking not to be named. Section 29 (a) of the IBC bars certain persons and entities from bidding for stressed assets. These include undischarged insolvents, wilful defaulters and anyone with a non-performing loan.

In the last case, a person shall be eligible to submit a resolution plan if he makes payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts before submission of the resolution plan.

For a fresh bid

“EXIM Bank’s exposure to Liberty Group turned a non-performing asset. Hence, Liberty has been asked to pay the dues in full in order to become eligible to participate in the next round of bidding,” the official mentioned earlier said. “Liberty is likely to pay to participate in the new round of bidding,” he said.

Liberty House, led by Indian-born businessman Sanjeev Gupta, has offered ₹5,200 crore on a deferred payment basis stretching over 5-10 years for the yard. The bid also includes an up-front amount of ₹400 crore and issue of debentures.

The lenders have set a liquidation value of ₹2,200 crore for the yard, which owes some ₹18,245 crore to a clutch of banks led by ICICI Bank.

The business plan submitted by Liberty House includes completing the pending ship orders and then pursuing a combination of shipbuilding and ship-breaking business.

It also includes setting up a steel rolling mill inside the yard to make steel by using materials generated from dismantling of ships, a person briefed on the business plan submitted by Liberty House said.

The resolution of ABG Shipyard has to be completed by 30 April, according to the timeline set by the National Company Law Tribunal, which was set up to oversee the bankruptcy law aimed at fixing the country’s mounting bad bank loans.