Numetal may move tribunal ahead of Essar lenders’ meet
Anticipating bid rejection, Numetal is likely to move the tribunal ahead of the next meeting of Essar Steel’s committee of creditors (CoC).
“It (an application) could be filed either in the National Company Law Appellate Tribunal (NCLAT) or the NCLT. If the CoC meeting is held on Friday, then it could be filed Thursday or Friday. However, if the meeting is postponed, filing may be delayed,” legal sources close to Numetal said, adding: “We believe the CoC is preparing for a fresh round of bids and will be rejecting the first two bids on commercial terms at its next meeting, without going into the issue of eligibility. We want our rights to be protected. We will file an application seeking a declaration of our eligibility and guidance on cure.”
The NCLT Bench had recently remanded the first bids — from Numetal and ArcelorMittal — back to the resolution professional (RP) and the CoC, with a direction to place all resolution plans for consideration of the CoC before initiating fresh bids. The NCLT said there is provision of a 30day cure period for overdue payments in case applicants are found to be ineligible under Section 29A (c). The Section bars a promoter of a non-performing asset from bidding.
Legal sources close to Numetal said if the bids were rejected on commercial terms, the 30-day cure period could be circumvented. “However, they would have to provide grounds as to why they were rejected, even if it is done on commercial terms. If both the bids are higher than liquidation value, they would have to provide grounds for rejection,” they said.
It is not clear whether ArcelorMittal is weighing legal options, but sources close to the company said: “At present, we see no basis for fresh bids. The order was quite clear that the CoC should review the bids and the bidders should be given 30 days to cure.”
The NCLT Bench had observed that mere sale of shares by ArcelorMittal and declassification as promoters would not absolve the company from their responsibility. The NCLT had indicated them to pay dues for Uttam Galva Steels and KSS Petron as a cure. However, it also asked the CoC to take an independent view on eligibility. The case of Uttam Galva Steels was scheduled before the NCLT Mumbai Bench but was not heard. The next date for hearing is June 6.
The bids in the first round were opened at the marathon CoC meeting held on Tuesday and sources said that ArcelorMittal’s bid was higher than Numetal’s. However, no decision on eligibility or fresh bids was taken. The next meeting was slated for April 27.
On Wednesday, ArcelorMittal India said in a tweet: “It can only be a positive development for the stakeholders of ESIL that the bids have now been opened as this is a critical step in identifying a strong, capable owner for the asset. We believe that, together with Nippon Steel & Sumitomo Metals, we are the most credible owner for ESIL, given our combined standing in the industry. We have submitted what we believe is an eligible, strong, and compelling bid. We believe it presents real value not just from a financial perspective, but also in terms of our long-term development plans for the asset.”
If Numetal does move the tribunal ahead of the CoC, it would not be a first by the company. On March 20, a day before the crucial CoC meeting where Numetal and ArcelorMittal were declared ineligible, Numetal had moved the Ahmedabad Bench of the NCLT. The Bench had issued a notice to the CoC through the RP and had observed that any decision taken on the resolution plan by the CoC on March 21 would be subject to the outcome of the Numetal application. On March 21, the CoC found both bids by Numetal and ArcelorMittal ineligible. Later, it went for a second round of bidding. However, Numetal moved NCLT seeking a stay on the opening of the bids and the process remained stalled till the NCLT order, which said the second round bids were not legally sound.