Prince Mathews Thomas Moneycontrol News
Can LN Mittal's ArcelorMittal still put in a bid for Bhushan Steel, though the last date for submission for bids for the troubled steelmaker was February 3? Yes, say legal experts.
While ArcelorMittal has publicly denied interest in Bhushan Steel any longer, industry people think otherwise.
What has been holding back the UK-based steel behemoth from bidding for any distressed steel assets is a clause in the Insolvency and Bankruptcy Code, which bars indebted promoters from bidding unless they have cleared their loans.
ArcelorMittal is in the process of selling its 29 percent stake in Uttam Galva Steels, which has been referred to the National Company Law Tribunal. Uttam Galva owes over Rs 5,000 crore to banks.
There are two things that favour ArcelorMittal now. One, the world's largest steelmaker is selling its stake in Uttam Galva Steels back to the latter's founding family.
ArcelorMittal had bought 29.05 per cent stake in Uttam Galva Steels in 2009 for Rs 120 a share. The company has now been forced to sell the stake - at Rs 1 a share - at considerable loss "because Uttam Galva has zero equity value now," said a senior executive at the company.
Now after selling its stake in Uttam Galva, ArcelorMittal has a clean slate and thus can bid for stressed steel assets referred to the NCLT. Apart from interest in Bhushan Steel, the Mittal company is also in the race for acquiring Essar Steel.
The clean slate notwithstanding, it has been debated if the LN Mittal company could still bid for Bhushan Steel since the deadline is past.
Interestingly though, while the IBC uses the expression 'resolution plan', the expression 'bid' is being used by Insolvency Professionals (IRPs) and Committee of Creditors (CoC), consisting of the lenders.
"As such, there is no bar in extending the timeline to accept bids, or accepting a bid after the deadline, as long as it is within the stipulated time prescribed under the IBC," says Jyoti Singh, Insolvency and Disputes Partner at Phoenix Legal.
"It depends on the CoC. It can extend the dates," added Singh.
In the case of Bhushan Steel, bids were submitted by JSW Steel, Tata Steel and a consortium of Bhushan employees on February 3. While the bids were to be opened on Monday, February 5, it has been deferred. Instead, the IRP - Vijaykumar Iyer of Deloitte - discussed resolution plans submitted by the bidders.
According to the process under the IBC, after the IRP ascertains that the bids and the resolution plans are in compliance, he sends them to the CoC. The Committee then takes up the plans and upon approving one plan, places it with the NCLT. The final announcement, on the winning bid, is made by the NCLT.
New hurdle
After clearing one, ArcelorMittal finds itself in front of a fresh hurdle in its endeavour for a steel empire in India. According to a report in Business Standard on Wednesday, Mittal is one of the promoters of oil infrastructure company KSS, whose unit has defaulted on loans in India.
Though the unit - KSS Petron - hasn't been admitted under the NCLT yet, ArcelorMittal could still face issues while bidding for companies such as Bhushan Steel, Uttam Galva and Essar Steel.
An ArcelorMittal representative told Moneycontrol that the company doesn't have any connection with Petron and is not relevant to the process of the Mittal company bidding for stressed assets in India.
"As long as they are able to prove that Mittal's stake in KSS doesn't fall within the definition of 'connected person' under section 29A of the IBC, ArcelorMittal will be able to put in a bid," says Singh.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
