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Creditors of Essar Steel could appeal against NCLT order

MUMBAI: The committee of creditors (CoC) for Essar Steel may appeal against the order of the bankruptcy court questioning the lenders’ decision to call a second round of bids and directing them to give existing applicants 30-days to correct the problems in their bids.

Two senior officials, who did not want to be named, said this issue was discussed at a close-door marathon meeting of lenders on Tuesday. But no decision was taken. The move, if it happens, will be prompted by the fact that the lenders are not satisfied with financial bids received from ArcelorMittal and Numetal, the two bidders, two senior officials said.

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The resolution professional rejected on grounds that they were not compliant with Section 29A of the Insolvency and Bankruptcy Code that bars defaulters form bidding. Both applicants later moved National Company Law Tribunal challenging the RP’s decision. On Tuesday, the RP had presented, for the first time, the financial bids before the committee of creditors.

Numetal has offered to pay about Rs 19,000 crore while ArcelorMittal has offered `32,000 crore, said two senior officials. “However, if we want better offers we have to expand the scope of bidders by going for a fresh round of bidding and to do this we will have to challenge the order passed by the bankruptcy court,” said one of the person quoted above.

JSW Steel and Vedanta Resources have shown interest in acquiring Essar Steel and this has given hope to lenders that a second round could enhance their gains and lower the haircut. Lenders will meet again on Friday to consider whether to comply with the order or challenge it. The Ahmedabad bench in its written order had said that “committee of creditors’ decision to go for inviting fresh bid may appear prudent but is not legally sound and valid.”

The committee of creditors now have two options — either to follow the court’s order which says that lenders should consider both– Numetal and ArcelorMittal — offers which means they would be forced to negotiate with only these two applicants. Alternatively, they can challenge the order which could give them opportunity for another round.

After the RP had rejected the two bids, the lenders had gone for a second round of bidding wherein RP received three bids which included Numetal in partnership with JSW Steel, ArcelorMittal in partnership with Nippon and Vedanta Resources. However, the court has directed lenders not to open bids of second round until they pass an order.


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