ArcelorMittal has transferred Rs 7,000 crore to an escrow account controlled by State Bank of India to become eligible to bid for Essar Steel Ltd., currently undergoing insolvency proceedings.
The funds will be used to extinguish any outstanding dues in Uttam Galva Steels Ltd. and KSS Petron Ltd., two people aware of the matter said on the condition of anonymity. The committee of creditors will now take this offer on record at its next meeting and verify the eligibility of the bidder, they added.
The India arm of the Luxembourg-based ArcelorMittal had bid for Essar Steel’s assets but was deemed ineligible by the committee of creditors owing to violations under Section 29(A) of the Insolvency and Bankruptcy Code. The National Company Law Tribunal had found that the company was liable—as a promoter of KSS Petron and Uttam Galva Steels Ltd.—to repay dues to the lenders of both companies. Under Section 29(A), the promoter of a defaulting firm is not eligible to submit a resolution plan for a company under the bankruptcy process.
A spokesperson for ArcelorMittal said the company had written to the lenders in response to a letter it received on May 8. While the contents of the letter are confidential, the company said in a statement that it was open to clear pending dues to be eligible for the bidding process.
Any offer to pay any outstanding loans of companies where we only had a passive stake with no management or governance role, would be made without prejudice to demonstrate the seriousness of our commitment to India and ESIL.ArcelorMittal Spokesperson
The Ahmedabad bench of the NCLT, in April, had said that a bidder disqualified for being a promoter of a defaulting company can repay any outstanding dues and become eligible for the bidding process. The bench’s order had come in response to a dispute raised by ArcelorMittal against the lenders’ decision to label it ineligible. The NCLT pointed out Section 30(4) of the IBC, where a bidder may be provided a period of 30 days to clear any such dues.
The CoC, earlier this month, voted in favour of allowing ArcelorMittal and Numetal Mauritius (the second bidder) to clear any pending dues within seven days and become eligible for bidding.
Ankit Miglani, managing director, Uttam Galva Steels said that he was unaware of these developments, adding that the company had not entered into any such arrangement with ArcelorMittal.