Essar Steel bid decision likely only after clarification on Article 29A

The resolution professional (RP) for Essar Steel is unlikely to take a decision on the resolution plans it has received from ArcelorMittal and Numetal until the government provides more clarification on Article 29A of the Insolvency and Bankruptcy Code (Amendment) Bill 2017, sources said. Article 29 A spells out the criteria on the basis of which a bidder can be considered ineligible to bid for assets admitted by the National Company Law Tribunal for resolution. Sources said the government is expected to issue clarification on this article, which will help the RPs and committee of creditors to take a decision on plans received from bidders who may be considered ineligible under this article. The issue is believed to have been discussed at a meeting of the Insolvency and Bankruptcy Board of India (IBBI) in New Delhi on Monday, but details of the outcome weren’t immediately available. “Both the bidders (for Essar) have submitted multiple legal arguments supporting their bids, and if the RP recommends one of the bids, the other will definitely challenge it in the court. The advisers to the RP have not submitted any recommendation as well. A decision is likely to be taken after the government issues its clarification,” a source with direct knowledge of the development said.

Last week, two proposed meetings between the CoC and the RP to discuss the resolution plans were cancelled. The RP for Essar Steel is Satish Kumar Gupta. Consultancy firm Grant Thornton and law firm Cyril Amarchand Mangaldas are understood to be the two advisers to the RP on this matter. Bankers, too, are hesitant about taking a decision on the bids although both the resolution plans may be legally sound. A banker familiar with the development had told FE that they are uncomfortable with the bidders even through they may be eligible as per the IBC norms. The eligibility of the bids is being questioned in the context of the amendment to the Insolvency and Bankruptcy Code (IBC), which categorically states that promoters of defaulting companies are not allowed to bid unless they repay all pending loans before submitting the resolution plan. While ArcelorMittal’s bid could face an eligibility test because of a stake that it held in Uttam Galva Steel, a defaulter on banks’ books, Numetal’s bid could run into trouble since one of the persons associated with the company, Rewant Ruia, is related to the promoters of Essar Steel.

ArcelorMittal has sold its stake in Uttam Galva Steel. A spokesperson for Numetal had earlier told FE that Numetal is a fully eligible resolution applicant and has submitted its resolution plan for Essar Steel. An ArcelorMittal spokesperson had said, “As we have previously said, we do not believe there is any legal basis under which ArcelorMittal would not be considered eligible to participate in the resolution process. ArcelorMittal was never the promoter of Uttam Galva. We had no board representation and no involvement in the management of the company even before selling our shareholding. ArcelorMittal is an internationally renowned, financially strong credit-worthy investor with an AA rating. We have invested successfully in many countries and developed a reputation for our ability to turn around distressed or under-performing assets. Section 29A of the IBC was not designed to prevent reputed, financially strong businesses, with no prior involvement with the asset in question from participating.”