The National Company Law Appellate Tribunal (NCLAT) on Friday ruled Numetal’s second bid for Essar Steel eligible, and gave ArcelorMittal time till September 11 to clear dues of its delinquent subsidiaries.
In its order, the NCLAT said the second round of bid submitted by VTB Capital backed-Numetal, where it dropped Rewant Ruia from the consortium, and partnered with JSW Group, is eligible to bid for Essar Steel under Section 29A. It further said that ArcelorMittal would , too, be eligible if it repaid dues of Uttam Galva Steels & KSS Petron by September 11.
Here are the key highlights of the NCLT order: ArcelorMittal had made a conditional deposit of Rs. 7,000 crore in its own current account. Conditional offer to pay overdues cannot be accepted until it has complied with Section 29A unconditionally. We give one opportunity ArcelorMittal to make payment of all overdue amount with interest for both the ‘Uttam Galva’ and the ‘KSS Petron’ by September 11. If such amount is deposited within time, the ‘Committee of Creditors’ will consider the ‘Resolution Plan’ submitted by ArcelorMittal along with other ‘Resolution Plans’, including the ‘Resolution Plan’ submitted by the ‘Numetal Ltd.’ on March 29, 2018 (second round of bids). An early decision should be taken by the ‘Committee of Creditors’. ‘Successful Resolution Applicant’ will take steps for execution of its ‘Resolution Plan’ and deposit the upfront money if proposed, in terms of the ‘Resolution Plan’. The impugned order dated April 19, 2018, passed by the NCLT so far as it relates to eligibility of ‘Numetal Ltd.’ as on the date of the submission of the ‘Resolution Plan’ dated March 19, 2018, is set aside.
Sources familiar with the matter said that ArcelorMittal would have to repay lenders close to Rs 7,000 crores to remain eligible.
"We note today’s NCLAT judgement and await the full order, which we will review before determining our next steps," ArcelorMittal said.
“In view of the Hon’ble NCLAT order pronounced today, SBI withdraws the process of sale of debt of Essar Steel India Ltd and will proceed as per the order of the Hon’ble NCLAT,” said State Bank of India spokesperson.
Earlier, ArcelorMittal had placed Rs 7,000 crore in its current account with State Bank of India, London and said the repayment would be made to lenders on the condition that Numetal’s bid is declared ineligible.
Suharsh Sinha of AZB & Partners told CNBC-TV18 that while Arcelor had deposited this default amount in an escrow, it was yet to make this payment to lenders.
“The court can technically take the view that the actual repayment has not been made to lender until it is transferred to their accounts,” said Sinha adding that it was very likely ArcelorMittal would appeal this order if they are not allowed to match Numetal's bid in the second round.
Also Read- Timeline: Essar Steel insolvency saga
As per sources, Numetal along with Rewant Ruia had initially offered close to Rs 19,000 crore for Essar Steel in the first round, while ArcelorMittal had offered a higher bid at Rs 32,000 crores on February 12.
Later, on March 21, the creditors committee of Essar Steel declared both bids ineligible under Section 29A of the Insolvency & Bankruptcy Code. ArcelorMittal was disqualified for being the promoter of delinquent Uttam Galva Steels & KSS Petron at the time of submission of the bid, and Numetal was disqualified as one of its minority shareholders Rewant Ruia, son of Essar Group’s co-founder, was a beneficiary. The creditors committee also invited a second round of bids for the company by April 2nd. Three players placed bids in the second round- ArcelorMittal along with Nippon Steel , Numetal dropped Rewant Ruia from the consortium and partnered with JSW Steel, and Vedanta Group also entered the race.
In the meantime, both Numetal & ArcelorMittal challenged their disqualification in the National Company Law Tribunal and the higher court, National Company Law Appellate Tribunal. On April 19, NCLT declared the second round of bids invalid, and asked the insolvency professional and creditors committee to re-consider the first round of bids and allow both Numetal & ArcelorMittal time to cure their ineligibility.
While ArcelorMittal deposited Rs 7,000 crores, Numetal contested bankers’ ask to clear all Essar Group dues for the consortium to remain eligible. Numetal also claimed it had placed a bid of Rs 37,000 crores in the second round, and was the highest bidder.
While the fine-print of NCLAT’s order is still awaited, Friday’s judgement paves the way for the third bidder- Vedanta Group- to enter the fray.
Anil Agarwal, Chairman,
Vedanta Group told CNBC-TV18 he welcomed today’s NCLAT ruling on Essar Steel. When asked if Vedanta Group’s bid was top Numetal’s Rs 37,000 cr offer in the second round, Agarwal said he would not speculate on the bid amount, and would “leave it to the fair process”. “Let the bids be opened, and whoever is the highest win” added Agarwal, admitting that their bid was not 'aggressive’.
A Numetal spokesperson said, “National Company Law Appellate tribunal (NCLAT) bench Hon’able Mr Justice S J Mukhopadhaya, Chairperson and Hon’able Mr Justice Bansi Lal Bhat, Member (Judicial) today upheld Numetal’s second round bid for Essar Steel’s resolution plan as a valid bid. This vindicates Numetal’s conviction that they are an eligible bidder and has given a compelling offer to the creditors for the Essar Steel’s resolution plan under IBC. Numetal welcomes the judgement of the NCLAT bench and re-iterates its faith in the judicial system of the country.”Essar Steel has dues of over Rs 49,000 crores to lenders, and is among the twelve large cases identified by RBI in its first defaulters list to be sent to NCLT.