What is happening in the Essar Steel bid?

War of words is running thick between the two bidders of the bankrupt Essar Steel. ArcelorMittal and Russian bank VTB Capital have challenged the validity of each other's bids on the basis of their own interpretation of the newly introduced insolvency and bankruptcy law.

VTB first termed ArcelorMittal's bid for 10 million tonne (MT) Indian steelmaker as ineligible. To which, billionaire LN Mittal's firm, which is the largest steelmaker in the world, on Monday hit back, saying its offer was eligible. The firm also questioned VTB's authority in deciding on the veracity of a rival bid.

"We continue to believe our bid is eligible and that, as the world's leading steel company in partnership with Nippon Steel and Sumitomo Metal, we have unrivalled industry expertise and a demonstrable track record that is very relevant for Essar Steel," ArcelorMittal said.

But, why is a Russian bank so aggressive in a bid for a steel plant in India?

To remind you, NuMetal Ltd, in which VTB is the largest shareholder, has submitted the bid. The consortium also includes Russian engineering firm Tyazhpromexport (TPE), Indo International Trading and Aurora Enterprises, owned by a trust controlled by Rewant Ruia, from the estranged promoter family of Essar Steel. Rewant is the son of Ravi Ruia, vice-chairman of Essar Group.

The Insolvency and Bankruptcy Code (IBC) bars owners and associates of defaulter companies from bidding for distressed assets which are up for sale. Makram Abboud, vice-chairman of VTB told media that the consortium is willing to drop Rewant as a partner if the situation demands so.

Earlier, The Hindu reported that ArcelorMittal has put in a bid exceeding Rs 50,000 crore to acquire the debt-laden Essar Steel, making it the highest offer above that of NuMetal.

The validity of ArcelorMittal's bid was questioned as they held a stake in the steel manufacturer Uttam Galva, another loan-defaulter facing insolvency proceedings. The Mittals, who were co-promoters in the company, shed their stake at a discount to become eligible for the Essar bid.

There were earlier reports that both the bidders were disqualified and the lenders led by State Bank of India will consider inviting fresh bids. But resolution professional (RP) Satish Gupta has denied the reports.