Supreme Court allows ArcelorMittal and Numetal to submit NPA resolution plans within eight weeks after clearing dues, modifies NCLAT order on bidding for Essar Steel
The Supreme Court, on Thursday (October 4), ordered both ArcelorMittal and Numetal to clear their dues within two weeks and granted the two giants an opportunity to bid for Essar Steel subsequently.
The top court bench of Justices Rohinton Fali Nariman and Indu Malhotra rejected the claim of each party (ArcelorMittal and Numetal) that the other was ineligible to bid for Essar Steel and ruled that both companies could resubmit their resolution plans within eight weeks of clearing their non performing assets.
While ArcelorMittal owes Rs 7,000 crore of outstanding dues related to Uttam Galva, where it held a promoter stake, and KSS Petron, the top court has asked Numetal to clear the dues of related parties.
The Bench has modified an earlier NCLAT order, which had held that Numetal is eligible to bid for Essar Steel. Asking the Committee of Creditors to take a decision within eight weeks on the bids submitted by Numetal and ArcelorMittal for Essar Steel, the apex court order said that 66% majority of Committee of Creditors (CoC) will finalise the bid and if the majority doesn’t approve any bid, then Essar Steel would go into liquidation. The court has also ruled that it must be ensured that ineligible bidders do not wriggle out of the clauses of the Insolvency and Bankruptcy Code.
ArcelorMittal had challenged the NCLAT order, which had asked the company to clear its dues worth Rs. 7,000 crore with respect to Uttam Galva and KSS Petron, to be eligible to submit a resolution plan for the debt-ridden Essar Steel in terms of Section 29A(c) of the IBC. The tribunal had directed ArcelorMittal to pay the NPAs of Uttam Galva and KSS Petron irrespective of whether its resolution plan for Essar Steel is accepted or not. Numetal, which also had outstanding NPAs, was, much to the chagrin of ArcelorMittal, not disqualified by NCLAT for the Essar Steel bid.
It may be recalled that the CoC, in its submissions, had said that the Supreme Court will have to lift the “corporate veil” to know the persons behind ArcelorMittal and Numetal and determine their eligibility according to provisions of the IBC.
In its order, the NCLAT had declared that Numetal’s second round bid for Essar Steel was eligible. But, ArcelorMittal challenged it saying that Numetal is a shell firm in which the Essar promoters are major shareholders.
The first round bidding by both ArcelorMittal and the Numetal had been rejected by the CoC for being associated with firms which are classified as defaulters, thereby violating Section 29(A) of the IBC. While ArcelorMittal’s bid was rejected on the grounds that two firms, Uttam Galva and KSS Pteron, associated with ArcelorMittal were defaulters, Numetal’s bid was rejected as Rewant Ruia, son of Essar Steel promoter Ravi Ruia, held 25 per cent stake in the consortium.
—India Legal Bureau, with Agency inputs