Billionaire Laxmi Mittal-led ArcelorMittal has moved the National Company Law Tribunal to challenge the decision of the committee of creditors rejecting its bid for Essar Steel, the company said in a statement on Monday. The SBI-led consortium of banks had on March 21 rejected the bids by Numetal and ArcelorMittal for Essar Steel on the ground that they were ineligible under the provisions of the amended Insolvency and Bankruptcy Code (IBC).
These two bids were in the beginning questioned by the insolvency resolution professional (IRP) as the promoters of both these firms had stakes in defaulting firms. While the Ruias who had a stake in Numetal also had a stake in Essar Steel, the Mittals had a stake in Uttam Galva which is also on the defaulters list. ArcelorMittal said, "We have already informed the stock exchanges that ArcelorMittal was declassified as a promoter of Uttam Galva. We have therefore today proposed a legal challenge to the decision of the resolution professional in the court in Ahmedabad."
This legal challenge is also critical to ensure that we protect our rights in the process given the legal challenge by Numetal against the decision of the committee of creditors, the ArcelorMittal statement added. Numetal's bid was rejected as one of the promoters of the special purpose vehicle is Rewant Ruia, the son of an Essar Group promoter Ravi Ruia, who is one of the original promoters of Essar Steel.
Even though the Luxembourg-based ArcelorMittal has teamed up with Nippon Steel & Sumitomo Metal Corp to bid for Essar Steel, it has been found ineligible as it has a joint venture with Uttam Galva, which has defaulted on loan payments and the case is pending with NCLT for resolution.
Numetal and ArcelorMittal were the only two bidders for Essar Steel which has been put up for auction as has defaulted on the payment of a staggering Rs 45,000 crore in loans to the SBI-led consortium of lenders.
Rejecting both the bids, the SBI-led consortium said under the provisions of Section 29A of the Insolvency and Bankruptcy Code (IBC), both the bids by the Mittal's and Numetal were ineligible. Section 29 A of the amended IBC bars promoters of defaulting firms and also related parties from buying out stressed assets being put up for auction to recover bad loans of banks.
In the statement, Arcelor-Mittal said it continues to believe that it's February 12th bid was strong and competitive and that it was fully eligible and therefore should have been placed before the committee of creditors by the IRP. The 30-bankers consortium has allowed rebid till April 2, while the petition of Numetal, which has already challenged the rejection at the NCLT, will be taken up on March 27.
Under the insolvency resolution process, the case should be settled within a maximum 270 days, which ends on April 29 in the case of Essar Steel. The two companies had submitted their bids on February 12 but have been slugging it out with each other over questions about their eligibility to participate in the auction.