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Last Updated : Jul 13, 2018 04:02 PM IST | Source:

Essar Steel auction: Points to ponder from the NCLAT proceedings

The next hearing is on Monday, July 16

Prince Mathews Thomas @prince0879
  • bselive
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Todays L/H

As the National Company Law Appellate Tribunal (NCLAT) hearing on the eligibility of bids by ArcelorMittal and Numetal for Essar Steel heads for another round of submissions from July 16, important questions now hang in the air.

For instance, does it matter that ArcelorMittal, which had sold its share in Uttam Galva Steel and KSS Petron before it submitted the bid on February 12, got the Securities and Exchange Board of India (SEBI) nod on promoter declassification only in March?

The resolution professional overseeing the auction had termed ArcelorMittal's bid ineligible because of the company's investment in the two defaulting companies. This was under the Insolvency and Bankruptcy Code's Clause 29A, which bars promoters of defaulting companies from bidding for stressed assets.

While ArcelorMittal has maintained that SEBI's nod shouldn't be the measuring stick for eligibility, it will be interesting to see the stance that the Tribunal takes.

This was one of the issues that were discussed by the judge during the hearings this week at the NCLAT. The hearing has been continuing since July 2, when the Tribunal had convened after a summer break.

Through this week, starting July 9, submissions were heard from lawyers representing ArcelorMittal, the resolution professional and Committee of Creditors, which consists of the lenders.

Acting in concert 

Much of the time this week was spent by ArcelorMittal lawyers to prove that Rewant Ruia, a shareholder in Numetal in the first round of bidding, was acting in concert with the promoters of Essar Steel, which had accumulated over Rs 50,000 crore in unpaid debts. The promoters include his father Ravi Ruia.

The resolution professional had turned down Numetal's bid in the first round after terming it ineligible. It was said that Rewant Ruia is a "connected person," who is also barred under Clause 29A.
ArcelorMittal argued that while IBC is silent on the issue of 'acting in concert,' it takes reference from the takeover code under the SEBI Act. "In a nutshell, ‘person acting in concert’ under Takeover Code (of SEBI) deems relatives like father and son to be acting in concert," ArcelorMittal had argued.

But the judge noted that the argument needs to be substantiated as per relevant Act.

It was further argued that Numetal was formed to bid for Essar Steel and that the entire earnest money was deposited by Aurora Enterprises, which is owned by a trust controlled by Rewant Ruia.

Escrow or not

Counsel for the Committee of Creditors, or CoC, Wednesday sprung a surprise when he said ArcelorMittal had deposited Rs 7,000 crore in its own current account, and not in an escrow account as claimed by the steelmaker.

The company had transferred the amount after it was asked to pay off dues of Uttam Galva and KSS Petron for its bid to qualify.

Though ArcelorMittal's counsel reiterated the company has shown its intention to qualify for the bids irrespective of the kind of account, the little detail did spring a surprise. Again is it enough that the intention has been shown?

The hearing will now resume on Monday, July 16, with Numetal's counsels taking the stage.

While the Tribunal may not give its order next week, executives from both the sides seem 'confident' about their respective case. The Tribunal could decide on the eligibility of the two bids, and also if the auction should limit to the first round or should proceed to the second.

Borrowing a parlance oft used in sports, at present there is everything to play for as far as Essar Steel is concerned.
First Published on Jul 13, 2018 04:02 pm
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