The Supreme Court on Thursday allowed two weeks to ArcelorMittal, NuMetal to repay any outstanding dues in order to acquire the debt-laden Essar Steel.
The order comes as a huge setback for NuMetal, as both the companies - NuMetal and Essar Steel - are connected. NuMetal is one of the debt-laden company's minority shareholders.
Theoretically, the payment of the outstanding dues of related parties will mean that NuMetal will have to pay the outstanding dues of the entire Essar Group, which alone is Rs 49,000 crore.
The Supreme Court order, however, can mean that NuMetal's outstanding payment can disqualify them out of the race to acquire Essar Steel race.
The Committee of Creditors to consider both proposals within eight weeks after curing of the defects, the top court said.
Both parties, NuMetal and ArcelorMittal, have been considered ineligible but if they cure their ineligibility by paying up whatever dues are pending, they can be allowed to re-bid for Essar, Shardul Shroff, Shardul Amarchand Mangaldas & Co said.
Suharsh Sinha, senior associate at AZB and Partners said, "The only question that arises now is what is the amount that NuMetal will need to pay to cure the NPA. We are very sure about what ArcelorMittal needs to pay, it is Rs 7,000 crore. But does NuMetal have to pay the entire outstanding of Essar Steel as Rs 49,000 crore, that seems to be quite an unreasonable proposition for NuMetal."
National Company Law Appellate Tribunal (NCLAT) had ruled that NuMetal's second bid for Essar Steel was eligible, but the same by ArcelorMittal would qualify only if it cleared the Rs 7,000 crore dues of its two for its delinquent subsidiaries KSS Petron and Uttam Galva, it was previously associated with. The company has also kept Rs 7,000 crore deposit in its current account at the London branch of State Bank of India (SBI).
Sinha added it was a good move for the apex court to intervene "because the NCLT and NCLATs have been granting quite a few extensions to the companies."
While ArcelorMittal had challenged the order asking it to pay Rs 7,000 crore to become eligible for the bidding, NuMetal had alleged that NCLAT had "wrongly" applied legal provisions to enable its rival bidder to pay the dues of two debt-ridden firms even after it had bid for Essar Steel.
Earlier, senior advocate Mukul Rohatgi, appearing for NuMetal, had said that its second bid was higher than ArcelorMittal's and moreover, it had already said the company would match the offer of its rival bidder.
ArcelorMittal had said that NuMetal was not eligible to bid for Essar Steel on several grounds, including that it was a "shell company" created by a firm in which Essar group promoters had majority shares.
"My only fear is that an asset like Essar Steel which is fundamentally viable had got a great prospect. It is one of the best steel plants in probably South Asia. A plant like that should not be pushed into liquidation merely because the process has not been managed well," Sinha said.
(With inputs from PTI)
Have you signed up for Primo, our daily newsletter? It has all the stories and data on the market, business, economy and tech that you need to know.