According to the latest updates in Essar Steel’s insolvency case, the NCLAT (National Company Law Appellate Tribunal) has put on hold the resolution process for Essar Steel and the next hearing on the case is scheduled on 23 Jul’18 after the summer break from 1 Jun to 1 Jul’18.
The NCLAT has refrained the company’s RP (Resolution Professional), CoC (Committee of Creditors) and NCLT Ahmedabad bench (National Company Law Tribunal) to pass any decision related to the insolvency resolution of Essar Steel.
While the stipulated 270-days deadline of Essar Steel’s resolution process under the IBC (Indian Bankruptcy Code) was ended on 29 Apr’18, the NCLT had extended the period till 28 May’18 when the application was filed in the tribunal.
On Tuesday, 22 May’18, the tribunal heard submissions from Numetal and ArcelorMittal, who are the two prominent bidders for Essar Steel. While Arcelor Mittal sticked to its stance that the company’s bid in first round of bidding should be considered Numetal pleaded for opening of second round of bidding.
The chaos in Essar Steel’s insolvency proceedings
The first round of bidding for Essar Steel was rejected by RP and second round of bids were invited after the RP termed Numetal and Arcelor Mittal’s bid in the first round as ineligible under clause 29A of IBC which prevents promoters of defaulting companies from bidding for stressed assets.
ArcelorMittal’s investments in Uttam Galva Steels and KSS Petron were said to be a hurdle, as the two companies had defaulted on loan repayments. Numetal was disqualified due to Rewant Ruia’s exposure in Numetal. Rewant Ruia is the son of Ravi Ruia, who is the promoter of Essar Steel.
Both Numetal and ArcelorMittal had challenged their disqualification in the first round of bidding by the resolution professional.
Although once again Arcelor Mittal and Numetal offered their bids for Essar Steel in the second round of bidding, the NCLT declared the invitation for the company’s second round of bidding as invalid and asked the lenders and RP of bankrupt to reconsider the first bids submitted by original bidders Arcelor Mittal and Numetal.
The CoC, in line with the NCLT order, had given both Numetal and ArcelorMittal seven days to clear outstanding dues on account of defaulting firms. While ArcelorMittal has parked INR 70 billion in an escrow account in State Bank of India, Numetal was asked to clear the dues of Essar Steel, as its minority shareholder Rewant Ruia was a ‘connected person,’ given that his father Ravi Ruia is co-founder of Essar Steel.
However, Numetal has challenged in the NCLAT the demand to seek payment on account of Rewant Ruia’s exposure in the consortium, even though it was an indirect and minority holding. The company is pushing to consider the second round of bidding as its second round offer (as disclosed) is higher than Arcelor Mittal’s bid.
Amid these arguments by both the parties, Arcelor Mittal and Numetal, the NCLAT has pushed the hearing date after two months giving the contentious race for Essar Steel a long break.
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