Lenders to Essar Steel Ltd. have decided to assess bids submitted by Numetal Mauritius and ArcelorMittal India on their individual merit.
The committee of creditors will not challenge an order passed by the National Company Law Tribunal last week, directing them to review bids submitted by the two companies. The CoC decision was taken at the end of deliberations that spanned over two days as lenders assessed the tribunal’s order, three people in the know told BloombergQuint on the condition of anonymity.
The two bids were considered ineligible by the resolution professional as they were seen to be in violation of Section 29(A) of the Insolvency and Bankruptcy Code. The section, introduced as an amendment, does not allow promoters of a defaulting company to submit a resolution plan. In the case of Numetal Mauritius, the Ruia family - promoters of the Essar Group - had an interest in the bidding entity. ArcelorMittal was disqualified as it was classified as a promoter of Uttam Galva Steel Ltd. and KSS Petron, both defaulting firms.
As the CoC had relied on the resolution professional’s decision on eligibility the NCLT ordered that lenders do their own evaluation and if found ineligible give the bidder opportunity to rectify that.
The CoC will conduct separate hearings for both these bidders to understand how they intend to resolve these issues under Section 29(A) of the IBC, the people quoted above said.
Numetal, ArcelorMittal’s Rival Bids
The lenders also took note of a letter submitted by Numetal proposing to “match and better” ArcelorMittal India’s bid. The Numetal offer, according to the people quoted above, is conditional and will depend on lenders disqualifying the bid submitted by ArcelorMittal.
The Luxembourg-based steel giant offered a 35-40 percent haircut to financial creditors in the first bid it had submitted, while Numetal, a VTB Bank-led special purpose vehicle, had offered a 65-70 percent haircut, BloombergQuint reported on Wednesday.
Essar Steel owes Rs 49,000 crore to its financial creditors.
Numetal Moves Appellate Tribunal
Separately, Numetal has also initiated proceedings at the National Company Law Appellate Tribunal challenging ArcelorMittal’s eligibility in bidding for Essar Steel. The NCLAT today agreed to hear Numetal’s plea and issued notices to the CoC, the resolution professional and ArcelorMittal. The next hearing is scheduled for May 17.
The CoC’s decision on the eligibility of both bidders will be subject to the NCLAT proceedings, the people quoted said.
Essar Steel is one of the largest cases being resolved under the insolvency process. Lenders initiated bankruptcy proceedings against the company after the Reserve Bank of India put it on a list of 12 large corporate defaulters in June 2017. The case was admitted for insolvency proceedings at the Ahmedabad bench of the NCLT in August 2017.