The National Company Law Appellate Tribunal (NCLAT) today agreed to hear on May 17 cross-petitions filed by Essar Steel bidders, NuMetal Ltd and ArcelorMittal India Ltd, challenging eligibility criteria.
The NCLAT issued notices to a committee of Essar Steel creditors, the resolution professional running an auction of the company and the two bidders on the cross-petitions.
While Russia's VTB Capital-backed NuMetal Ltd challenged a lower company court order allowing rival ArcelorMittal to clear bank dues of associate companies so that it can become eligible for the acquisition of Essar Steel, steel baron Laxmi Mittal-run firm wanted NuMetal to be disqualified.
It also wanted an order of the Ahmedabad bench of National Company Law Tribunal declaring it ineligible to bid for Essar Steel to be set aside.
The cross-petitions were mentioned before a bench of NCLAT which issued notices, replies and rejoinders of which are to be filed within one week. The matter has been fixed for hearing on May 17.
The NCLAT took up the petitions on a day when a panel of lenders to Essar Steel is slated to meet to decide on the fate of the first round of bids put in on February 12.
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NCLT, Ahmedabad had asked the lenders to not consider the second round of bids and instead look at the first round of bids where ArcelorMittal and NuMetal were in direct competition.
In the petition, NuMetal said the Ahmedabad-bench of National Company Law Tribunal had disqualified ArcelorMittal India Pvt Ltd from bidding to acquire Essar Steel on grounds that it was a promoter company of firms that had defaulted on payment of bank loans.
The NCLT had, however, "erred" in permitting ArcelorMittal India Ltd "to cure the ineligibility by making payment of the overdue amounts of Uttam Galva Steel Ltd and KSS Petron" within 30 days, it said.
Allowing ArcelorMittal to clear dues after the government frame legislation, barring promoters who had defaulted on bank loans from bidding for companies that were being auctioned to recover unpaid loans, was not in accordance with the law, it contended.
NuMetal sought setting aside and quashing of the NCLT order that directed the resolution professional (RP) conducting the auction and the committee of creditors of Essar Steel India Ltd to "reconsider the resolution plan submitted by Arcelor Mittal India Pvt Ltd and afford Arcelor Mittal India Ltd an opportunity to make payment of the over dues amount of Uttam Galva Steels Ltd and KSS Petron Pvt Ltd after the submission of the resolution plan for Essar Steel and cure the ineligibility".
ArcelorMittal field two petitions stating that the NCLT, Ahmedabad had "wrongly" held that it stood disqualified by virtue of the provision of Sections 29A of the IBC which bar promoters of delinquent companies from bidding for stressed assets.
It said the NCLT "overlooked" the fact that it had sold its shares in Uttam Galva Steel Ltd on February 7, days before the bids for Essar Steel was submitted on February 12.
ArcelorMittal held that it had never held a seat on the board of the company and on its perusal, the stock exchanges removed its name as a promoter last month.
On KSS Petron, it said it cannot be treated as a promoter as it neither had any board rights or any management rights. It "merely had an investment in the global parent of KSS Petron".
"Laxmi Niwas Mittal had invested his personal funds through his trust in Fraseli (a Luxembourg entity) which invested into KSS Global BV, Netherlands entity, and at which level there was a shareholder's agreement with some minority rights protection at that level. Neither he or any entity connected with ArcelorMittal was considered to be a promoter of KSS Global," it stated.
It went on to state that the creditors did not treat the firm as a promoter of KSS.
ArcelorMittal wanted NuMetal bid be rejected because its backers include a company controlled by the son of a billionaire Essar Steel founder.
Aurora Enterprises has since been bought out of the bidding group by JSW Steel Ltd.
Essar Steel had a debt of Rs 49,000 crore and was referred to NCLT in June last year. Last week, the Ahmedabad bench of the NCLT had asked the lenders to reconsider the first bids submitted by NuMetal and ArcelorMittal on February 12. It rejected the second round of bids submitted as well as mining baron Anil Agarwal's Vedanta on April 2.
It had also asked the RP and the lenders to give 30 days' time to these bidders to clear their defaulted accounts.