Essar Steel lenders may not allow Numetal to change structure in second bid

Lenders to Essar Steel may not allow Numetal to change its corporate structure stated in the second round of bidding if it comes up for consideration.

“The committee of creditors (CoC) may not allow Aurora Enterprises to be dropped from Numetal because this is not a fresh request for proposal (RFP),” a major lender said.

Sources close to Numetal, however, pointed to the order passed by the National Company Law Appellate Tribunal (NCLAT) on May 22 this year. The order said during the pendency of appeals, the resolution professional (RP), the CoC and the adjudicating authority would not pass any order approving or rejecting plans, or on liquidation.

The CoC has, however, made no decision. Right now, the matter is before the NCLAT, where hearing will resume on July 2.

Sources also said the RFP was submitted by Numetal, not Aurora.

Two amendments were made to the RFP, inviting resolution plans. The RFP was amended by the first addendum on February 8 and the second addendum on March 23.

Numetal and ArcelorMittal submitted the first round of bids on February 12 and the second round on April 2.

In the second round, Numetal submitted the bid with a revised corporate structure and was joined by JSW Steel as an investor in the step-down subsidiary. ArcelorMittal and Vedanta were the other bidders.

If Numetal is not allowed to change its corporate structure, the implications of Section 29A are likely to come into play.

In the first round of bidding for Essar, ArcelorMittal, and Numetal were given seven days to “cure” their ineligibility, in accordance with the order of the Ahmedabad Bench of the National Company Law Tribunal (NCLT).

“Cure” meant paying outstanding dues. For ArcelorMittal, it meant paying the debts of Uttam Galva and KSS Petron; for Numetal, it was on account of firms connected to Rewant Ruia. Numetal had, however, offered to drop Aurora Enterprises, of which Rewant Ruia is the ultimate beneficiary, even in the first bid. However, lenders had not accepted it as a “cure”.

To become eligible for Essar, ArcelorMittal has transferred Rs 70 billion to an escrow account on account of Uttam Galva and KSS Petron.

However, the lender pointed out that the amount was in escrow and was a conditional offer. The offer was subject to declaring ArcelorMittal a successful and eligible bidder of Essar. The CoC has hence sought guidance from the NCLAT on the matter.

In the NCLAT, Numetal pleaded the second bids be opened while ArcelorMittal, the only other bidder in the first round, opposed it.

The Ahmedabad Bench of the NCLT had found the second round of bids invalid because in the first round, ArcelorMittal and Numetal were not given time to “cure” their ineligibility. Hence, the NCLT had remanded the first round of bids in the RP and CoC for reconsideration.

Both Numetal and ArcelorMittal had filed appeals against the order in the NCLAT.