But the increasing delay has stakeholders concerned as deadline looms.
Even as the auction of Essar Steel takes a detour – in the form of another amendment of the Insolvency and Bankruptcy Code – stakeholders are keeping an eye on the April 28 deadline, until when the entire process is expected to be completed.
The Ministry of Corporate Affairs is believed to be considering two amendments that will change the definition of “connected people” as per the IBC.
Until now, a promoter or investor in a defaulting company was debarred from participating in the auction of stressed assets referred to the National Company Law Tribunal.
This had jeopardised bids by ArcelorMittal and Numetal for Essar Steel. While ArcelorMittal was a shareholder in Uttam Galva, a defaulter, Numetal’s minority shareholder Rewant Ruia belonged to the promoter family of Essar Steel.
But a possible amendment will pave the way for both ArcelorMittal and Numetal.
“According to the expected amendment, an investor, but one who is not in the management, of a defaulting company, will be allowed to place bids,” a senior lawyer told Moneycontrol.
This is akin to arguments put forward by ArcelorMittal and Numetal in their defence. While ArcelorMittal had contended that it was not part of the Uttam Galva board and didn’t manage operations; Numetal had put in a similar argument to separate Rewant Ruia from Essar Steel promoters.
Rewant is the son of Ravi Ruia, one of the founders of Essar Group.
But not many in the industry are amused by this possible amendment.
“This will open a Pandora’s Box. There will be several litigation and companies will ask for rebids in many of the cases,” a senior official from a private steel company told Moneycontrol.
Interestingly, the amendment will also clear any doubts over ArcelorMittal’s Chairman and CEO Lakshmi Mittal’s ‘connection’ with his brother Pramod Mittal’s companies.
Two companies promoted by Pramod – Ispat Profiles and Gontermann Peipers – have been in dire straits. While Ispat Profiles was referred to the Board of Industrial and Financial Reconstruction in 2013, Gontermann has been running in losses since 2012. According to industry sources, both the companies have defaulted on interest payments.
With the definition of “connected person” open for interpretation, there was a question mark if Lakshmi Mittal could be answerable for the performance of his brother’s companies.
Earlier, Seema Jajodia, sister of JSW Steel’s Sajjan Jindal, had transferred her stake in Monnet Ispat, which was also referred to the NCLT. JSW Steel had emerged as the sole bidder for Monnet Ispat. Jajodia even announced to the BSE that she shouldn’t be called a promoter of Monnet Ispat any longer.
Interestingly, the latest possible amendment will follow the first change in IBC last year. The IBC was amended to prevent promoters of defaulting companies from buying stressed assets.
But the development may further delay the auction of Essar Steel. ArcelorMittal and Numetal had put in their bids by February 12.
According to the rules set for resolution process, the deadline for Essar Steel’s auction has been set for April 28. “Furthermore, the bids should be submitted to the Committee of Creditors at least a month before the deadline. So eligible bids should be presented by March 28,” said the lawyer.The auction could possible become a race against time, especially with many experts expecting a second round of bidding.