Mumbai: Numetal too will have to regularise the accounts of defaulting companies connected to the members of the consortium, as does ArcelorMittal, to be eligible to bid for bankrupt Essar Steel, legal experts involved in the matter said.
Based on legal advice, lenders have asked both Numetal and ArcelorMittal to make a case for their eligibility to bid for Essar Steel on May 2 as well as give a plan to clear the arrears of the connected parties, two senior officials involved in the resolution of the bankrupt steel company said, speaking on the condition of anonymity.
VTB Bank-led Numetal has a member of Essar Steel’s promoter family as a partner and that raises questions about its eligibility to bid for the steelmaker — the Insolvency and Bankruptcy Code prevents promoters of stressed companies to bid for other such assets unless they cleared the arrears.
While the consortium has decided to drop Rewant Ruia as a member, that alone will not be enough to make it eligible, the experts said.
This is because the lenders are considering the applications submitted by the two bidders in the first round, as ordered by the National Company Law Tribunal, and Numetal at the time had listed Rewant Ruia as a member of the consortium.
“The formal resolution plan submitted on February 12 has Rewant Ruia, son of Ravi Ruia who is a founder promoter of Essar Steel, as a co-applicant,” said one of the legal experts. “Thus as a connected member, Numetal will have to clear dues of the companies connected to Ravi Ruia wherever there are defaults.”
Essar Steel, promoted by brothers Shashi and Ravi Ruia, is facing insolvency proceedings with claims of Rs 49,000 crore from financial creditors.
Legal experts said if chairman Lakshmi Mittal dropping his name as promoter of defaulting companies — Uttam Galva and KSS Petron in his case — is not enough for ArcelorMittal to be eligible, the same holds for Numetal as well.
While Numetal said it was willing to exclude Rewant Ruia from the consortium, that decision was conveyed to the lenders a few days after the deadline to submit bids ended, and so its application does not have a legal sanctity, the legal experts told ET.
Members from committee of creditors (COC) declined to comment on the development. Spokespeople for both ArcelorMittal and Numetal said they believed their bids were eligible.
The National Company Law Tribunal had ordered lenders to consider the eligibility of the bidders of the first round — ArcelorMittal and Numetal were the only two at the time — while prohibiting them to open the bids received in the second round. “The lenders should provide opportunity not exceeding 30 days for making payment of overdue amounts or to remove its disability,” the tribunal had said.
While ArcelorMittal will have to clear dues of two defaulting companies totalling Rs 7,000 crore, details of Numetal’s arrears are not immediately known.
Responding to ET, a spokesperson for Numetal said: “We have been given the opportunity to discuss our eligibility. As previously stated, Numetal’s resolution plan is fully eligible and compliant and appropriate for Essar Steel and we hope that after hearing us, the COC will also appreciate the same.”
Legal experts say that in all likelihood Numetal will challenge the lenders’ decision to ask them to regularise the dues of co-applicant’s connected party.
A spokesperson from Arcelor-Mittal said: “We look forward to having the opportunity to present our offer, which we have always believed is eligible and offers considerable value to stakeholders, with the committee of creditors.”