NCLAT will now hear on July 23, giving the contentious race for Essar Steel a long break
The National Company Law Appellate Tribunal Tuesday put on hold the resolution process of Essar Steel. The tribunal has also asked the resolution professional overseeing the auction, and the Committee of Creditors, to refrain from taking any decisions.
The tribunal heard submissions from Numetal and ArcelorMittal, who are in the race for Essar Steel. While Mukul Rohatgi appeared for Numetal, Harish Salve represented ArcelorMittal.
Sticking to its stance, ArcelorMittal argued that bids in the first round should be considered. The world's largest steelmaker had transferred Rs 7,000 crore into an escrow account of State Bank of India to show its intent in clearing the eligibility hurdle.
The resolution professional had initially termed first round bids by ArcelorMittal and Numetal ineligible under Clause 29A of the Insolvency and Bankruptcy Code.
The clause prevents promoters of defaulting companies from bidding for stressed assets. ArcelorMittal's investments in Uttam Galva Steels and KSS Petron were said to be a hurdle, as the two companies had defaulted on loan repayments.
A source close to ArcelorMittal criticised Numetal’s call to open second round bids. He alleged that the consortium’s strategy has been to “remove competition, and enable Numetal — and the Ruia family — to buy back the asset at a significant haircut to debts.”
He added: “This is an act entirely at odds with both the letter and spirit of 29A of the IBC. That is obvious from the low-ball opportunistic offer they made in the first round of only 19,000 crore – even below the liquidation value of Essar. As that plan hasn’t worked now they are attempting to get back into the process by throwing big numbers around despite having previously argued themselves in Ahmedabad that the second round bids should not be allowed. They change tack daily depending on which way the wind is blowing.”
The lenders had asked ArcelorMittal to clear the dues to make its bid in the first round eligible.
Similarly, Numetal was asked to clear the dues of Essar Steel, as its minority shareholder Rewant Ruia was a 'connected person,' given that his father Ravi Ruia is co-founder of Essar Steel.
But Numetal's lawyer, Rohatgi, argued that the second round bids should be opened as the company had bid Rs 37,000 crore for Essar Steel. Rewant Ruia is not part of the Numetal consortium in the second round.
The judge asked if the two sides were ready for a full hearing, and subsequently put the hearing for July 23 which will continue for four days, after a summer break from June 1 to July 1.
Essar Steel's resolution had crossed its initial deadline of April 29, and was extended by a month to May 28.Meanwhile, Numetal has offered to maximise the debt recovery for the Indian lenders with a Rs 37,000-crore cash offer besides injecting significant amount in the company and in operating expenditure and capital expenditure. "We believe we are an eligible resolution applicant from day one as per IBC and neither Numetal nor any of its shareholders including Aurora has any overdue loans with Indian lenders. In any case other shareholders of Numetal have bought out Aurora shares while maximising the bid offer in the second round and hence we are fully eligible," the company said in a statement.