|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, which were not considered as viable and appropriate by the CoC keeping in view of the time constraint, while in our humble view to be more sound reasonable and legally transparent... therefore, we feel while remanding back the matter to the CoC for reconsideration of the resolution plan and resolution applicant, to look at option 1 as per the deliberation made in the CoC meeting dated March 21, 2018…”. Seshagiri Rao, joint managing director and chief financial officer, JSW Steel, said, JSW Steel had evinced interest earlier to bid for Essar. But the CoC decided to invite bids from only shortlisted expression of interest (EoI) which ruled it out citing time constraint.
Subsequently, JSW partnered NuMetal in a step-down subsidiary, Nu Metal & Steel. Asked if JSW would bid alone if the CoC did decide to invite a fresh round of bids and not restrict to the shortlisted EoIs, Rao replied in the affirmative and said that is what we wanted. “We would be able to submit the bids on time,” he added.
The committee of creditors is expected to meet shortly to take a call on the bids after Thursday’s order by the Ahmedabad Bench of the National Company Law Tribunal (NCLT). Some suggested the meeting could even take place on Monday.
The CoC has a host of issues to consider.
The NCLT Bench has directed the resolution professional to place before the CoC the first round of bids from NuMetal and ArcelorMittal.However, whether the CoC will give Numetal and ArcelorMittal 30 days to cure their bids or invite a fresh round of bids during the time has been left to the CoC.
The 270-day stipulated date for Essar was April 29, but the NCLT Bench has excluded the period from March 20 to April 19, the day of the order, from the mandatory 270-day window of the insolvency process, as laid out by the IBC (Insolvency and Bankruptcy Code). With this, the deadline now stands extended by a month.
The order said the CoC did not follow the prescribed procedure to afford reasonable opportunity to the resolution applicants to make overdue payment to remove disability of the resolution applicants or to make good of the disability.
Section 29A (c) refers to a provision that disallows a person from submitting a resolution plan if he has an account that has turned a non-performing asset (NPA) for more than a year unless he makes payment of all overdue amounts with interest thereon before submission of a resolution plan.
The proviso says that if the resolution applicant is ineligible under clause (c) of Section 29A, the resolution applicant shall be allowed by the CoC such period, not exceeding 30 days, to make payment of overdue amounts, in accordance with the proviso to clause (c) of Section 29A.
The CoC may also deliberate on whether declassification by ArcelorMittal in Uttam Galva and KSS Petron will make it eligible for Essar.
The Bench has observed ArcelorMittal will have to pay overdue amounts to lenders on account of Uttam Galva Steels and KSS Petron to become eligible. “Mere sale of shares and declassification as promoter after the companies have gone into default cannot absolve them of responsibility,” the tribunal observed.
An ArcelorMittal spokesperson said, “We are currently reviewing the order and will comment further in due course as appropriate.”
However, while directing the resolution professional to place the first round of bids before the CoC, the Bench has said it did not wish to rule on the issue which is required to be considered by the CoC and not be influenced by the observations of the Bench.
ArcelorMittal had sold its shares in Uttam Galva and L N Mittal in KSS ahead of the Essar Steel bid to become eligible. Uttam Galva is an NPA for more than a year as is KSS Petron, a subsidiary of KSS.
In KSS Petron, L N Mittal, chairman and chief executive officer of ArcelorMittal group, (through holding companies) exercised negative control, whereas in the case of Uttam Galva, ArcelorMittal Netherlands (AM Netherlands, a connected person of AM India) exercised positive control on Uttam Galva.
In the case of KSS Petron, the views of resolution professional advisors, Cyril Amarchand Mangaldas (CAM), and Darius Khambata differed.
CAM’s view was that negative control also constituted control for the purposes of testing under Section 29A(c). In Khambata’s view, however, negative control for the purposes of Section 29A(c) and accordingly KSS Petron did not constitute ground for disqualifying AM India.
The court observation however stated that Section 29A did not distinguish between positive and negative control.
NuMetal’s legal counsels believe the order provides scope for the company to change the shareholding in order to qualify for the bid whereas ArcelorMittal will have to pay dues.
NuMetal had mentioned in its first bid that if Aurora Enterprises, in which Rewant Ruia is the ultimate beneficiary, was found ineligible then it could be dropped. If Ruia is dropped then the question of payment of overdue amount may not arise.
“What the NCLT order is trying to say is that whatever ineligibility we have found in the plan for 29(A), as per 30(4) we have to give them 30 days’ time to rectify the same. In case of NuMetal, now where the bidders have only changed, as per the order they can now rectify their disability as per 29(A). In case of ArcelorMittal, it appears that the court wants the payment to be done,” one of the CoC counsels told Business Standard.