New Delhi, Feb 13: The race to take over Essar Steel entered the final phase with the submission of two bids on Monday, one by Numetal, a company in which VTB Bank has a majority and the Ruias are a minority partner, and the other by ArcelorMittal.
Potential bidders such as Tata Steel and Vedanta did not participate in the process.
However, even as the bid details are yet to be made public, bankers are not sure if the two bids will pass eligibility muster.
They say the resolution professional (RP) and the National Company Law Tribunal (NCLT) will have to take a call on the eligibility of ArcelorMittal and Numetal because it involves interpreting the Insolvency and Bankruptcy Code (IBC) and relevant rules. A senior executive of a public sector bank said the IBC was amended recently through an Ordinance to keep out defaulting companies and their promoters from participating in the auction for stressed assets.
So, what are the contentious issues being raised by bankers?
In the case of the Ruias, Essar Steel has defaulted on loan repayments, which led to the bankruptcy proceedings against the company. The Ruias own a 10 per cent stake in Numetal through a trust, while VTB Bank of Russia owns a majority stake with two other partners.An Essar executive, however, said that none of the promoters of Essar Steel had bid for the company.
“We are in a minority and have no management control over Numetal,” the executive said.
Resolution professional Sumit Binani, however, said: “The spirit behind Section 29A of the IBC is to bar wilful defaulters whose dues had been classified as non-performing assets (NPAs) for more than a year and all related entities of these firms. It, however, allows defaulting promoters to be part of the debt resolution process if they repay dues in a month to make their loan accounts operational and the resolution happens within the timeframe specified in the code. Even if any such defaulting promoter has a minority stake in an SPV proposing a resolution plan or proposes to be in management of the corporate debtor during the implementation of the resolution plan, it is likely to fall under the barring provisions of Section 29A.”