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The National Company Law Appellate Tribunal (NCLAT) yesterday paved the way for Russia’s VTB Capital-backed Numetal to remain in the race to acquire Essar Steel.
However, in a set back to ArcelorMittal, NCLAT refused to clear its eligibility under Section 29A(c) of Insolvency and Bankruptcy Code and asked it to clear all dues of its related companies to cure its ineligibility.
The judgment was delivered by a two-member Bench headed by Chairperson Justice SJ Mukopadhyaya in a cross-appeal by ArcelorMittal India and Numetal over challenges to their eligibility to submit resolution plans for debt-ridden Essar Steel under Section 29A of IBC.
Section 29A relates to ineligibility of the ‘Resolution Applicant’ and prohibits related parties of defaulting firms from participating in the resolution process.
The Appellate Tribunal had reserved its order in the appeals in July this year.
The Appellate Tribunal declared that Numetal had cured its ineligibility in terms of Section 29A(c) & (h) of the Code at the time of submission of the second resolution plan by severing all direct/indirect ties with Essar promoter Rewant Ruia’s Aurora Holdings. Aurora Holdings held 100% shares in Aurora Enterprises Limited (AEL) which held 100% shares in the Numetal.
“As on 29th March, 2018, as the ‘AEL’ was not the shareholder of ‘Numetal Ltd.’ and all the three shareholders aforesaid being eligible, we hold that ‘Numetal Ltd.’ in respect of ‘Resolution Plan’ dated 29th March, 2018, is eligible and the provision of Section 29A, as on 29th March, 2018 is not attracted to the ‘Numetal Ltd.’”, the Appellate Tribunal held.
It refused to clear ArcelorMittal’s eligibility under Section 29A(c) of the Code in spite of its parent company’s move to divest its shares in its subsidiaries and NPAs, Uttam Galva and KSS Petron.
“Once the stigma of “classification of the account as NPA” has been labelled on the promoter of the ‘Uttam Galva’, even after sale of shares by ‘AM Netherlands’ it may cease to be a member or promoter of the ‘Uttam Galva’, but stigma, as was attached with it, will continue for the purpose of ineligibility under clause (c) of Section 29A, till payment of all overdue amount with interest and charges relating to NPA account of the ‘Uttam Galva’ is paid.”
While the appeal was pending, ArcelorMittal made a conditional deposit of Rs. 7,000 crore in an escrow account with the State Bank of India to settle the dues of Uttam Galva Steels and KSS Petron.
To this, the Appellate Tribunal said,
“A conditional offer to pay the over dues amount cannot be accepted till it is complied in the light of proviso to clause (c) of Section 29A unconditionally.”
It, nonetheless, gave time till September 11 to ArcelorMittal to clear the dues of Uttam Galva and KSS Petron to cure its ineligibility.
In April, National Company Law Tribunal, Ahmedabad Bench, while setting aside the first round of bidding for Essar Steel, had allowed the two final resolution applicants, ArcelorMittal and Numetal to cure their ineligibility under Section 29A.
ArcelorMittal India was deemed ineligible under Section 29A for being related to two NPAs- Uttam Galva and KSS Petron through the same parent company. Numetal, on the other hand, was held to be ineligible for being indirectly held by Essar promoter Rewant Ruia through Aurora Holdings.
Essar Steel owes over ₹49,000 crore to its consortium of creditors led by the State Bank of India.
Apart from Numetal and ArcelorMittal, Vedanta also participated in the second round of bidding for Essar Steel.
Numetal was represented by Senior Advocates Mukul Rohtagi and Mihir Thakur with Advocates Keyur Gandhi, Gautam Singh, Rudreshwar Singh, Arjun Joshi, Krishty Baptist and Shaili Singh.
ArcelorMittal was represented by Senior Advocates Harish Salve, Dr. Abhishek Manu Singhvi, S.N. Mukherjee, Rajiv Nayyar with lawyers from Karanjawala & Co and Luthra & Luthra. The lawyers include Ruby Singh Ahuja, Sudhir Sharma, Vishal Gehrana, Anupam Prakash, Sameen Vyas, Abhishek Swaroop, Akhil Anand, Shubham Saigal, Misha Chandra, Avishkar Singhvi and Amit Bhandari.
Image courtesy: Hindustan Times