MUMBAI|KOLKATA: The National Company Law Appellate Tribunal has stayed Vendata Resources’ acquisition of Electrosteel Steels under the bankruptcy procedure following an appeal by bidder Renaissance Steel, that had questioned the evaluation process adopted by the resolution professional.
The appellate tribunal on Monday ordered all parties to maintain status quo and directed resolution professional (RP) Dhaivat Anjaria to explain how Vedanta was declared the winning bidder. It also directed the committee of creditors to Electrosteel to file a comparative matrix of the bidders within 10 days.
“Lenders will have to justify on what basis Vedanta was selected over others; the process followed and the evaluation process on arriving at how is the bidder,” said a senior person aware about the development.
Concerned parties have been asked to reply to court by May 17. Prior to the court ruling, Electrosteel’s resolution plan was seen to be the first success case of large accounts that were referred to bankruptcy court following directions by Reserve Bank of India (RBI). In early April, the Kolkata bench of bankruptcy court had approved a resolution plan passed by Electrosteel Steel’s lenders to allow billionaire Anil Agarwal’s Vedanta Resources acquire the bankrupt steel company for Rs 5,320 crore.
The resolution professional had declared Vedanta as the highest bidder and had entered into negotiations with the company. Emails sent to Vedanta and Renaissance Steel did not get any response as of press time Tuesday. This is the second time Renaissance raised concerns about the Electrosteel resolution process. Previously, on March 20, court ordered the RP to give a hearing and reply to concerns raised by it.
National Company Law Tribunal (NCLT), which looks into bankruptcy petitions, had then directed the RP to place all objections of Renaissance Steels against Vedanta and Tata Steel before the committee of creditors (CoC) for an “independent consideration”.
Then, Renaissance moved the tribunal to prevent the RP from proceeding with further negotiations with Vedanta, the highest bidder, till the issue of its eligibility and that of Tata Steel was determined. But it did not get a stay. The bidders for Electrosteel, included Tata Steel, a fund-backed by Edelweiss, Vedanta Resources and Renaissance Steels.
In a statement issued on the day bankruptcy court approved the resolution plan, Vedanta said a wholly owned subsidiary of it would acquire Electrosteel’s shares for Rs 1,805 crore and provide additional funds of Rs 3,515 crore by way of debt. “Upon implementation of the resolution plan, the company will hold approximately 90% of the paid up share capital of Electrosteel,” it had said, adding that the remaining 10% would be held by Electrosteel Steels’ existing shareholders and financial creditors. NCLAT has also ordered steering committee not to spend any amount except that required for day to day operations.