ArcelorMittal has transferred Rs 70 billion to an escrow account of State Bank of India (SBI) owing to payment of outstanding dues relating to defaulting firms in a bid to become eligible for Essar Steel.

Sources close to the development said a significant amount of around Rs 70 billion had been put into the SBI account with a proposal on escrow of the deposited funds.

Calcutta: ArcelorMittal plans to scale up Essar Steel's capacity to 8.5 million tonnes in the medium term if it manages to win the bid, the company informed shareholders while declaring a robust first-quarter result that saw a net income of $1.19 billion, backed by the highest steel margin in nearly six years.

The Luxembourg-based company did not give any indication on how aggressive it was going to be for Essar but said the asset provided a compelling opportunity to enter a high growth market like India.

Numetal is likely to challenge Essar Steel’s committee of creditors’ (CoC) decision that it will have to repay existing debt of Essar Steel before being considered eligible to bid for the bankrupt steelmaker in a higher court, legal sources close to the development said. Late on Tuesday, the CoC notified both Numetal and ArcelorMittal that they would have to clear all existing dues within a week before their bids are considered to be eligible.

The committee of creditors (CoC) of Essar Steel on Wednesday heard out explanations from ArcelorMittal and Numetal, the two bidders in the race for the loss-making steelmaker. Both companies made presentations to establish their eligibility to bid for the steelmaker, bankers familiar with the development told FE.

The committee of creditors (CoC) in the Essar Steel insolvency resolution case has decided to issue notices, in compliance with the National Company Law Tribunal (NCLT) Ahmedabad Bench’s order of April 19, to ArcelorMittal and Numetal to cure their ineligibility.

The notice, which has not yet been officially issued, will ask bidders ArcelorMittal and Numetal to comply with the NCLT Bench order, said a source.

Numetal has moved the National Company Law Appellate Tribunal (NCLAT) challenging the NCLT order that pointed towards payment of overdue amount for ArcelorMittal to cure its ineligibility. Legal sources in Numetal said the NCLT order, which suggested a 30-day cure period for payment of overdues for ArcelorMittal, wasn't applicable. It was applicable to companies who had bid before the IBC amendment, but ArcelorMittal submitted its bid for Essar Steel after the amendment, they said.

Indian lenders will discuss a forensic audit report prepared by Kroll, a corporate investigations and risk consulting firm, which said bids by both ArcelorMittal and Numetal, a VTB Bank of Russia majority owned company, are ineligible to bid for Essar Steel. If the lenders decide to go ahead with the Kroll report, the first round bids by both ArcelorMittal and Numetal is likely to be rejected on Friday.

The committee of creditors (CoC) for Essar Steel will meet on Tuesday to take a call on the bids after Thursday’s order by the Ahmedabad bench of the National Company Law Tribunal (NCLT). Sources close to the development said, ahead of the CoC meeting, major lenders of Essar Steel met on Monday to thrash out a strategy for the meeting.

JSW Steel may go it alone as the committee of creditors (CoC) for Essar Steel decides to consider a fresh round of bids altogether.

JSW Steel is pointing towards a part of the NCLT order, which was uploaded on Saturday, which says “in the option no. 1, it has been suggested to initiate a new process for inviting bids from all interested parties (starting with initiation of new expression of interest) and follow the entire process as per new request for proposal as approved by the CoC,

With the National Company Law Tribunal (NCLT) rejecting the second round of bidding in the insolvency process of Essar Steel and asking the resolution professional (RP) and the committee of creditors (CoC) to review the first round of bidding, there is once again uncertainty on what to expect.

“The Insolvency and Bankruptcy Code (IBC) is a new law and today’s order would just help to make the IBC more robust,” said Alok Dhir of Dhir & Dhir Associates.

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