After NCLT order, Essar Steel lenders to decide on status of Numetal, Ruia contention

KOLKATA: The Committee of Creditors (CoC) of Essar Steel will decide whether Numetal’s consortium, which has Rewant Ruia’s Aurora Investments as one of its investors, will remain in contention after the National Company Law Tribunal (NCLT) directed the lenders to consider the first set of bidders for the debt-laden steelmaker.

Numetal sources said the court order implies that the lenders’ committee will have to consider the original bid by the consortium, in which Aurora holds 25% stake and is led by Russia’s VTB Bank. Engineering consultancy Tyazhpromexport (TPE) and Indo International are its other members.

“Rewant Ruia is one of the beneficiaries of the Aurora Trust. VTB Bank must have taken legal advice that being a beneficiary does not disqualify it,” Alok Dhir of Dhir & Dhir Associates said.


On Thursday, the NCLT deemed the second round of bids for Essar Steel invalid and directed the CoC to consider the first set of offers from Numetal and Arcelor-Mittal, ruling that the banks would have to decide on the eligibility of bidders rather than the resolution professional.

Legal Circles Divided
On Friday, a Numetal source said, “In case there are issues with the Aurora stake, we expect to get a chance to rectify it.”

“The original bid includes a proposal to alter the composition of the consortium in case the CoC has any issues with the shareholding,” the same Numetal source added. After submitting the bid for Essar Steel on February 12, Numetal said it has written numerous letters to the resolution professional on Ruia’s participation but is yet to get a response. Makram Abboud, vice-chairman, international, VTB Capital, in an interview to ET on March 5, said that the firm is always adaptable.

“We are very interested in this asset and we intend to buy this one way or the other and if the government asks us to make changes, we will have a discussion. We are always flexible when we need to be to attain our goal,” Abboud told then.

However, legal circles were divided on the implications of the order, although they are yet to go into the fine print of the order.

Numetal sources contended that the order implied CoC would now have to give them a chance to rectify the bid. “We had given them the proposal to change the shareholding of the consortium. If there was any problem with Rewant’s stake, the other members of the consortium would buy his stake,” the source added.

The important thing to note here is that the NCLT order clearly sets a precedent wherein it sets aside the CoC decision on ineligibility and mentions that the RP and the CoC acted only on the basis of the advice given by their consultants — Grant Thornton and Cyril Amarchand Mangaldas — but did not apply their own independent mind on the issue, Dhir said.

“They did not allow the bidders any opportunity to demonstrate their eligibility or factor in their explanation, thus denying them natural justice.” The NCLT Ahmedabad order is in line with the judicial thinking on the subject. It will serve as a precedent for other RPs and CoC to conduct the process so that they do not suffer infirmities and delays, Dhir added.

Similarly, ArcelorMittal’s original offer is also slated to come up for consideration by the CoC. Arcelor’s bid is also under scanner for being listed as a co-promoter of Uttam Galva, a defaulter, on the date of submission of the Essar bid on February 12. It got declassified as a promoter in the exchanges only on March 23.

Uttam Galva meanwhile offered to pay back its entire dues of Rs 5,600 crore, a move that could hugely benefit Arcelor’s bid for Essar. Legal circles seem to be divided over whether it will be considered by the CoC when it has a relook at the Arcelor bid. “Here the date of submission of the bids will have to be considered to decide on the eligibility,” Dhir said.

On Monday, the Securities Appellate Tribunal (SAT) is slated to hear minority shareholders who raised the issue of Arcelor selling off its stake in Uttam Galva before bidding for Essar Steel. Areclor-Mittal has appointed Harish Salve to argue its case, while Janak Dwarkadas will represent the minority shareholders who have said they lost value after the inter-se transfer of share in Uttam Galva between the promoters – the Miglani family and Arcelor. With Arcelor exiting the company, the value of their shares have fallen.

The shareholders have also raised the issue of Arcelor not following the Non-Disclosure Undertaking. Minority shareholders have alleged breach of listing regulations under Sebi’s Listing Obligations & Disclosure Requirements Regulations, 2015 and sought a stay on approval to ArcelorMittal for selling stake.

Arcelor decided to sell its entire stake in Uttam Galva through an inter-se transfer of shares among promoters. Sainath Trading Company Limited — a group entity of the promoters of Uttam Galva, the Miglani family — bought 4,13,27,931 shares, representing the entire block of shares owned by ArcelorMittal Netherlands BV at an average of Rs 24 per share.