JSW Steel's bids have stood the test of scrutiny, unlike ArcelorMittal's, says Seshagiri Rao

Responding to ArcelorMittal's allegation of making "mockery" of the Insolvency and Bankruptcy Code (IBC), JSW Steel said it's bid has stood the test of eligibility, unlike the world's largest steelmaker's.

"Two different resolution professionals overseeing the auctions of two different companies have scrutinised the facts of the case and declared JSW Steel eligible. JSW Steel has stood the test of third party scrutiny," JSW Steel's joint Managing Director and Group CFO Seshagiri Rao told Moneycontrol.

On Wednesday, ArcelorMittal took to Twitter and tagged JSW Group's Chairman and Managing Director Sajjan Jindal stating:

"@sajjanjindal Interesting what decision is being taken on Monnet today given it’s clear JSW runs afoul of 29A as they are related to the existing promoter….who is making the mockery here?"

On Tuesday, lenders of Monnet Ispat had approved JSW Steel's bid for the company. The Sajjan Jindal company had bid along with AION Investments.

Interestingly, JSW Steel on Thursday announced that it has got the Letter of Intent from the lenders of Monnet Ispat and Energy, confirming it as the new owner of the stressed asset.

JSW Steel, in partnership with AION Capital, had bid for Monnet Ispat, which was referred to the National Company Law Tribunal after defaulting on loan repayments.

ArcelorMittal's allegation had brought to fore again a point raised by Bhushan Steel employees (the company was also put under NCLT and JSW Steel was one of the bidders). They had alleged that Sajjan Jindal's sister Seema Jajodia was a promoter in Monnet Ispat and thus making Jindal a "connected person." Seema was married to Sandeep Jajodia, promoter of Monnet Ispat.

Apart from preventing promoters of defaulting companies from bidding for stressed assets, Clause 29A of the IBC also debars "connected persons."

But Rao reiterated that unlike ArcelorMittal, which had invested in Uttam Galva, JSW Steel did not invest in Monnet Ispat. "ArcelorMittal was a direct investor and promoter in Uttam Galva. So our case is not comparable," he said.

ArcelorMittal had later exited from the stressed company, and got itself declassified as a promoter.

"The fundamental point we are trying to make is that if JSW is eligible then surely ArcelorMittal must be as well. Which we always believed we are," a source close to the Lakshmi Mittal company told Moneycontrol.

But Rao said that apart from the first reason - cited above - there is additional information available with the resolution professional due to which JSW Steel's bid wasn't turned down. He declined to explain.

Both the companies are in the race for Essar Steel. While ArcelorMittal has partnered with Nippon Steel & Sumitomo Metal, JSW Steel is an investor in the Numetal consortium.

Ahmedabad bench

Meanwhile, the Ahmedabad bench of the NCLT on Thursday refused to let the bids for Essar Steel be opened in the second round.

Although the bids in the second round of bidding for Essar Steel have been submitted, these can't be opened until the NCLT bench rules on the pleas by Numetal and ArcelorMittal to reconsider their bids from the first round.

"The Bench has indicated that the entire order may be pronounced latest by Monday. They have also indicated that their order will also deal with the period of 270 days," said a source.

The resolution period of Essar Steel gets over on April 28, a deadline that is looking increasing difficult to meet.