Mumbai: Legal experts have differed over the eligibility of ArcelorMittal India Pvt. Ltd’s bid for Essar Steel Ltd, according to the minutes of the meeting held by the committee of creditors (CoC) of the distressed steel maker.
The eligibility of ArcelorMittal was tested under Section 29 (c) for its control over KSS Petron Pvt. Ltd and Uttam Galva Steels Ltd, both of which had been non-performing assets for more than a year, according to the minutes of the meeting held on Wednesday and reviewed by Mint.
Cyril Amarchand Mangaldas, the counsel for the resolution professional (RP), had viewed that Lakshmi Niwas Mittal, chairman of ArcelorMittal group, should be disqualified on account of its control over KSS Petron under Section 29 (c) of the Insolvency and Bankruptcy Code (IBC).
Darius Khambata, a senior counsel, who was approached by Cyril Amarchand Mangaldas, on the other hand said KSS Petron was not a ground for disqualifying ArcelorMittal as it did not constitute “control” under IBC.
Both, however, agreed ArcelorMittal Netherlands exercised control over Uttam Galva and a mere divestment of shareholding does not tantamount to being eligible for bidding.
“In Mr. Khambata’s view, if AM Netherlands has legitimately divested its shareholding in Uttam Galva and completed all legal and regulatory formalities relating to declassification of AM Netherlands as promoter of Uttam Galva, prior to submission of the resolution plan by AM India, it would be eligible to submit a resolution plan (and would not be subject to the disqualification under Section 29 (c) of IBC for having an NPA of more than 1 year),” said the copy of the minutes.
“Mr. Khambata has opined that a resolution applicant needs to be eligible under Section 29A of IBC not only on the date of submission of the resolution plan but must also remain eligible till the approval of its resolution plan by NCLT under Section 31 of IBC,” the minutes added.
Cyril Amarchand Mangaldas recommended to the RP to go ahead with Khambata’s opinion, according to the minutes.
RP concluded ArcelorMittal Netherlands continued to be classified as a promoter of Uttam Galva and had not completed the regulatory compliances relating to declassification as a promoter of Uttam Galva.
CoC also discussed others options, including allowing new bidders to submit expressions of interest and extending the due date for all resolution applicants.
Specifically, CoC discussed JSW Steel Ltd’s request to bid for Essar Steel, despite it being not part of the bidders that had submitted EoIs in the initial round of bidding. To this, representatives from ICICI Bank stated that it’d be unfair to allow JSW’s bid as it did not submit an EoI.
Also, given the timeline of the resolution process, the CoC advised against it. Cyril Amarchand Mangaldas briefed lenders that JSW could approach National Company Law Tribunal, seeking its approval to participate in the bidding process of Essar Steel.
Some lenders, including ICICI Bank, Edelweiss Asset Reconstruction Co. and Punjab National Bank, raised concerns around the 270 day deadline under the IBC.
Edelweiss, for instance, requested the RP to approach NCLT and seek extension of the deadline beyond the stipulated 270 days. (Source Mint)
