NuMetal and ArcelorMittal, both in the race to acquire bankrupt Essar Steel, defended their positions before the Ahmedabad bench of the NCLT today over their disqualification in the first round of bidding claiming that rules have been followed before submitting their bids.
After taking into consideration the views by both the appellants during the hearing, the tribunal, comprising adjudicating authority Manorama Kumari and Harihar Prakash Chaturvedi, posted the matter for further hearing tomorrow.
The case pertains to the lenders disqualifying ArcelorMittal's and NuMetal's -- the only two bidders for the crippled 10-million tonne Essar Steel at Hazira in Gujarat that owes more than Rs 45,000 crore to over 30 banks--citing technical issues on March 23 which primarily means their ownership structure.
These companies challenged the lenders' decision at the NCLT soon after they were disqualified. Following this, the NCLT allowed rebid till April 2, ArcelorMittal along with Nippon of Japan, Anil Agarwal's Vedanta and NuMetal along with JSW Steel have put in bids.
These two bids were from the beginning questioned by the resolution professional and others as the promoters of both these firms were defaulters in other firms -- the Ruias in Essar Steel and the Mittals in Uttam Galva.
Appearing for NuMetal, senior counsel Mukul Rohatgi stressed that the rejection of ArcelorMittal from the first round of bidding was appropriate under Section 29A of the IBC which deals with the disqualification.
Rohatgi further told the bench that the whole idea behind the IBC is that to keep away willful defaulters.
"As per section 29A, a person who intends to buy (a stressed) firm should not be a defaulter in the past, unless you wash your sins first" said Rohatgi.
He said ArcelorMittal had a joint venture with Uttam Galva with 29 per cent stake and that firm went NPA in 2016 with around Rs 6,000 crore of dues, and has not yet paid neither before the first bid date of February 12 nor before the second bid date of April 2.
"The bidder was a co-promoter of Uttam Galva for 10 years. Thus, you have to pay the debt if you are a promoter of an NPA company. The law is simple. So, disqualification of ArcelorMittal must continue" he said.
Maintaining that ArcelorMittal was rightly disqualified, Rohatgi also said ArcelorMittal was in management control of another NPA firm KSS Petron. "You can't walk in like an innocent purchaser. Past will haunt you. ArcelorMittal did not pay then, nor now" he said.
He said though the BSE declassified ArcelorMittal as a promoter of Uttam Galva only in the last week of March, following which the company was allowed to bid in the second round, "law does not allow such dubious method. Only way to remove the taint is that the debt is paid." It can be noted that ArcelorMittal had a joint venture with Uttam Galwa with 29 per cent stake, while NuMetal is 25 per cent owned by Essar Steel's original promoter Ravi Ruia's son Rewant Ruia through a Mauritius-based investment vehicle Aurora Trusts.
Defending his client, senior counsel Janak Dwarkadas appearing for NuMetal, defended Rewant Ruia, saying he is just a beneficiary of Aurora Trusts, and does not have control of the main bidder, that is NuMetal.
The other promoters of NuMetal include the PE arm of the Russian state-run VTB Bank with 40.1 per cent stake, India International, a Dubai-based metals trading company promoted by an NRI with 25 per cent stake and the Russian engineering giant TPE with 9.9 per cent stake.
He said Section 29A under which the bid was rejected in the first round, was wrongly interpreted by the RP.
"I think that the problem is in the surname (of Rewant). It was a mistake by the RP in treating Rewant Ruia, who is just a shareholder, as some who is 'acting jointly or in consort with the resolution applicant', that is NuMetal. It was a wrong interpretation of section 29A," he said.
On the other side, senior counsel Abhishek Manu Singhvi, appearing for ArcelorMittal, said NuMetal was rightly disqualified as it did not clear the issues related to shareholding before the bid date of February 12.
Singhvi also said ArcelorMittal has sold its stake in Uttam Galva before the bid date, which makes them eligible for bidding in the first round. The two firms had moved NCLT soon after they were disqualified by the lenders on March 23 after a meeting in Mumbai.
Rejecting both the bids, SBI-led consortium said under the provisions of Section 29A of the IBC both the bids by the Mittal's and NuMetal were ineligible as promoters of these companies are indirectly linked to the original promoters.
But in the second round of bidding that closed April 2, a four groups led by world's biggest steelmaker ArcelorMittal-Nippon, mining mogul Anil Agarwal-led Vedanta and a consortium of Russia's VTB Capital-backed Numetal-JSW Steel have put in bids for Essar Steel.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)