The NCLAT, which heard their arguments on Thursday, will now sit again on May 22
The hearing of the National Company Law Appellate Tribunal (NCLAT) on the Essar Steel auction on May 17, may have lasted a little over five minutes but was enough to add another layer of complexity to the contentious race.
Numetal, which had till now argued that the auction shouldn't proceed to the second round, changed its stance. The VTB Capital-led consortium said it has offered Rs 37,000 crore in the second round bid, which should now be opened.
Its competitor ArcelorMittal too has had a change in opinion. While earlier it had argued in the National Company Law Tribunal (NCLT) that it was in favour of the second round of bids to be opened, the world's largest steelmaker now wants the first round bids to be considered.
The NCLT had in April termed the invite for second round bid invalid. It had also asked the Essar Steel lenders to give Numetal and ArcelorMittal time to rework their bids, which had been termed ineligible in the first round.
The two bids, according to the resolution professional, didn't meet the Clause 29A of the Insolvency and Bankruptcy Code.
The Clause prevents promoters of defaulting companies from bidding for stressed assets.
Numetal had approached the Appellate Tribunal against the NCLT order.
Following the NCLT order, the lenders gave Numetal and ArcelorMittal time to rework their bids, specifically asking them to clear dues of defaulting companies connected to them.
Numetal though added another petition at the Appellate Tribunal, arguing that it is not liable to pay any due.
On the other hand, earlier this week, ArcelorMittal transferred Rs 7,000 crore in an escrow account of State Bank of India, to show its "commitment" to the process. Uttam Galva Steels, in which ArcelorMittal was a promoter, owes banks about Rs 7,000 crore.
While this was short of a full repayment of the dues, the steelmaker hoped that this would keep it in the auction.
"... while we have always believed our offer was eligible, as a demonstration of our commitment to India and Essar Steel we have indicated to the Committee of Creditors our readiness to settle outstanding dues of companies where we only had a passive shareholding," ArcelorMittal said in a statement on Thursday.
This shift in its strategy saw a change in Numetal's plan. While it has maintained that its shareholders - including Rewant Ruia and his Aurora Enterprises - are not liable to pay any dues, the company has now pushed for the second bid.
That is because in the second round, Aurora Enterprises is no longer a part of the Numetal consortium. "We have always maintained that the rest of the shareholders can buy out Aurora's holding when needed," said a legal source.
Going by Clause 29A, Rewant Ruia was considered a "connected person" given his father Ravi Ruia is a co-founder of Essar Steel, which has accumulated over Rs 40,000 crore in dues.
While ArcelorMittal was said to have bid Rs 38,500 crore in the first round, Numetal's bid was at about Rs 19,000 crore.
A source said ArcelorMittal's bid included capital infusion of Rs 8,000 crore.
Another source added Numetal's "like to like bid - compared to ArcelorMittal's first-round bid - would amount to Rs 45,000 crore. This will include about Rs 6,000 crore in capital infusion."
Numetal argued that the second round bid should be considered to maximise the asset value of Essar Steel and to ensure that banks take as low a haircut as possible.
Essar Steel's lenders have also given a submission to the NCLAT on Thursday, and may probably put in their case when the Tribunal meets next on May 22.
The lenders will seek the Tribunal's opinion on the ArcelorMittal's move to transfer Rs 7,000 crore.The arguments will now continue on May 22.