The first round of resolution plans submitted for Essar Steel Ltd saw ArcelorMittal India offer greater value than competitor Numetal Mauritius, bankers in the know told BloombergQuint on condition of anonymity.
The first round of bids were opened by the Committee of Creditors (CoC) on Tuesday after the National Company Law Tribunal (NCLT) said that the committee must determine the eligibility of these bids after reviewing them. The CoC had earlier chosen to reject both bids even before they were opened, as the resolution professional appointed in the Essar Steel insolvency case deemed them to be ineligible under Section 29 (A) of the Insolvency and Bankruptcy Code (IBC).
ArcelorMittal proposed a 35-40 percent haircut on financial creditors’ dues, said two people familiar with the bid details. Numetal’s bid proposed a steeper haircut of 65-70 percent, they said.
Essar Steel owes more than Rs 49,000 crore to financial creditors.
Emails sent to ArcelorMittal India and Numetal seeking details of the submitted bids remained unanswered.
At the meeting, lenders also decided to seek more information from the bidders to determine their eligibility, bankers who were present during the deliberations told BloombergQuint on condition of anonymity. It was felt that it was too premature to call the bids ineligible under Section 29(A) of the Insolvency and Bankruptcy Code, they said.
Bankers were forced to consider these bids after the Ahmedabad bench National Company Law Tribunal directed them to do so.
The order came after both bidders approached the tribunal, arguing that their bids should be deemed eligible and a second round of bids should not be entertained. The two bids were considered ineligible by the lenders and the resolution professional as they were seen to be in violation of Section 29(A) of the IBC. 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., a loan defaulter.
The NCLT found lapses in the way the decision was taken as the lenders had not opened the bids, and instead relied on the recommendation of the resolution professional.
The lenders also did not offer a 30-day period to both bidders to repay their dues and rectify problems in Section 29(A), the NCLT noted. This is a mandatory procedure under Section 30(4) of the IBC, the tribunal had said in its order.
Essar Steel’s lenders will meet again to further discuss the eligibility of both bidders. If the lenders once again declare these bids ineligible, the bidders are free to challenge the decision at the NCLT. Lenders have also been asked to consider a completely new bidding process in which new bidders will be invited to submit their bids.
Both ArcelorMittal and Numetal had also submitted fresh bids after lenders called for them earlier this month. The Vedanta Group had also submitted their bid in that round. It remains unclear how these will be treated if the bids in the first round is deemed ineligible. The NCLT in its order noted that prima facie these bids look invalid, but did not clarify further.