ArcelorMit­tal as­sails NCLAT or­der in SC, re­luc­tant to pay `7,000 cr for Es­sar bid­ding

Financial Chronicle - - FRONT PAGE -

Aday af­ter the re­ports that ArcelorMit­tal has given an ul­ti­ma­tum to the lenders of Es­sar Steel to clear its bid, the steel and min­ing ma­jor on Wed­nes­day as­sailed the or­der of Na­tional Com­pany Law Ap­pel­late Tri­bunal (NCLAT) ask­ing it to pay Rs 7,000 crore to be­come el­i­gi­ble bid­der. The LN Mit­tal-pro­moted group, in the Supreme Court, said that it had al­ready di­vested its shares in the firms Ut­tam Galva Steel and KSS Petron, whose bad loans were di­rected to be paid by it.

ArcelorMit­tal In­dia, which has made a bid of Rs 42,000 crore for Es­sar Steel, al­leged be­fore a bench of Jus­tices RF Na­ri­man and Indu Mal­ho­tra that NuMetal was in­el­i­gi­ble to bid for the steel com­pany.

On the other hand, NuMetal, a con­sor­tium of Rus­sia's VTB-JSW, told the bench that it has also filed an ap­peal chal­leng­ing the NCLAT or­der al­low­ing ArcelorMit­tal to take part in the bid.

“ArcelorMit­tal is com­pletely dis­qual­i­fied. The law says that the pe­ti­tioner is dis­qual­i­fied for want of non-pay­ment (of Rs 7,000 crore),” se­nior ad­vo­cate Mukul Ro­hatgi, ap­pear­ing for NuMetal, said.

Se­nior lawyer Har­ish Salve, ap­pear­ing for ArcelorMit­tal, as­sailed the NCLAT or­der.

“The com­pany had ex­ited Ut­tam Galva in Fe­bru­ary this year and its re­vised bid was sub­mit­ted af­ter it had di­vested from Ut­tam Galva”, Salve said. “More­over, ArcelorMit­tal never had any direc­tors on the board of Ut­tam Galva”, he added. “We did not set up these com­pa­nies (Ut­tam Galva Steel and KSS Petron). We did not ex­er­cise man­age­ment pow­ers. I had di­vested the shares. No bank has ever made any de­mand with re­gard to their loans. No per­sonal guar­an­tees were given,” Salve fur­ther said. Salve also re­ferred to NuMetal's ear­lier share­hold­ing pat­tern and said it was in­cor­po­rated in a joint ven­ture with Arora En­ter­prises and Rus­sian VTB Bank. Arora En­ter­prises was owned by Re­want Ruia who is re­lated to Es­sar Steel pro­moter, said Salve. “The Euro­pean Union had passed an or­der against the VTB Bank for ir­reg­u­lar­i­ties and it was "un­usual" that a Rus­sian bank was want­ing to take over a sick com­pany”, he fur­ther added. At the out­set, when Salve al­leged that NuMetal was in­el­i­gi­ble to bid, the bench said “You worry about your client (AMI) and not about Ro­hatgi’s client (NuMetal)”.

He said ini­tially the bids of both ArcelorMit­tal and NuMetal were re­jected but later NuMetal was al­lowed to bid and a con­di­tion was im­posed on AMI to pay the money as it was a “stigma”. The bench posted the ap­peal of ArcelorMit­tal for hear­ing to­mor­row when the ap­peal of Numetal may also come up for con­sid­er­a­tion.

On be­ing in­quired as to whether the court would pass any in­terim or­der in the mat­ter, the bench said it “will pass or­der straight­away. There will be no in­terim or­der.” ArcelorMit­tal has moved the apex court chal­leng­ing the NCLAT or­der of Septem­ber 7 by which it had held as el­i­gi­ble the sec­ond bid of NuMetal, a con­sor­tium of Rus­sia's VTB-JSW, for Es­sar Steel.

The NCLAT had asked ArcelorMit­tal to clear the stigma of de­faulter by clear­ing the dues of its then sub­sidiaries. It had last Fri­day ruled that NuMetal's sec­ond bid for Es­sar Steel was el­i­gi­ble but the same by ArcelorMit­tal will qual­ify only if it cleared the Rs 7,000 crore dues of firms it was pre­vi­ously associated with within three days.

Both the com­pa­nies had in Fe­bru­ary sub­mit­ted sep­a­rate bids to takeover Es­sar Steel, which lenders were auc­tion­ing, to re­cover their Rs 49,000 crore de­faulted loans. The Com­mit­tee of Cred­i­tors (CoC) had, how­ever, dis­qual­i­fied both the bids say­ing their pro­mot­ers were tied to com­pa­nies which were bank loan de­fault­ers and hence in­el­i­gi­ble un­der Sec­tion 29A of the In­sol­vency and Bank­ruptcy Code (IBC). The sec­ond round of bids was called where JSW Steel joined NuMetal to put in a bid of Rs 37,000 crore, while Vedanta en­tered the fray as a third bid­der. ArcelorMit­tal too had put in a bid. The NCLAT had last week di­rected the lenders of the Es­sar Steel to ex­pe­di­tiously take a de­ci­sion on the bids. It held that NuMetal was not re­lated to pro­mot­ers of Es­sar Steel and hence el­i­gi­ble for sub­mit­ting a res­o­lu­tion plan for the com­pany. How­ever, in the case of ArcelorMitta, it had held that the com­pany was con­nected to Ut­tam Galva and KSS Petron, which are clas­si­fied by banks as NPAs.

ArcelorMit­tal In­dia, which has made a bid of Rs 42,000 crore for Es­sar Steel, al­leged be­fore a Supreme Court divi­sion bench that NuMetal was in­el­i­gi­ble to bid for the Es­sar Steel, to which Mukul Ro­hatagi re­torted that LN Mit­tal-pro­moted group is com­pletely dis­qual­fied

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