Locked in a direct fight to acquire Essar Steel, ArcelorMittal today sought disqualification of Russia's VTB Capital-backed NuMetal Ltd, alleging that the firm was acting in concert with delinquent promoters of Essar group but the NCLAT hearing the case did not agree to its contention.
When first bids for loan defaulter Essar Steel were called in February, Rewant owned 25 percent in Mauritius-based investment vehicle NuMetal. VTB Group bought out Aurora Trust to cure its ineligibility as bankruptcy rules disqualify owners of distressed assets from bidding for those assets in the insolvency process.
At a hearing before a two-member bench of the National Company Law Appellate Tribunal, senior lawyer Abhishek Manu Singhvi, appearing for ArcelorMittal, said "NuMetal and Rewant Ruia are alter ego of each other. They both are the same."
He alleged that the two are acting in concert with each other.
The NCLAT bench posed several probing questions, including whether a company can be considered to be an alter-ego of its shareholder - especially when such minority shareholder is neither in management or control of NuMetal.
It observed that question of disqualification of NuMetal on the ground that one of its minority shareholders is related to promoters of Essar requires substantiation based on law.
The NCLAT also observed that allegations of NuMetal acting in concert with the promoters of ESIL cannot be based on general analysis and needs be substantiated with legal grounds in accordance with law.
The NCLAT is hearing cross-petitions filed by NuMetal and ArcelorMittal challenging each other's eligibility to bid for Essar Steel which is being auctioned after the company defaulted on payment of Rs 51,800 crore loans to lenders.
NuMetal wants ArcelorMittal disqualified because it was the promoter of loan defaulting companies, Uttam Galva Steel and KKS Petron. The world's largest steelmaker says it has paid Rs 7,000 crore of loans of Uttam Galva Steel to cure its ineligibility.
Arguments before the NCLAT today remained inconclusive and hearing would resume on July 9.
"Today's argument was about why ArcelorMittal believes NuMetal should be ineligible...," a spokesperson of ArcelorMittal told over the phone.
The counsel in his argument said there is a connection between all three and Section 29A of the Insolvency Bankruptcy Code does not allow connected parties to bid for any stresses asset, the person said.
The NCLAT had on May 22 ordered status quo on insolvency of Essar Steel for two months as it admitted petitions of Numetal and ArcelorMittal over the bidding eligibility.
ArcelorMittal and NuMetal put in a second round of bid in April after the first round of bids were opined to be invalid due to the delinquent promoter connection.
In the second round, NuMetal says it has offered over Rs 37,000 crore for Essar Steel. ArcelorMittal is, however, opposed the opening of the second round of bids and sought only the first round of bids to be considered.