Essar Steel resolution may take time; deadline could extend beyond 270 days

Essar Steel resolution may take time; deadline could extend beyond 270 days

Mumbai, Apr 18: The resolution process for Essar Steel could get extended beyond the 270-day deadline of April 29, a source close to the matter said, especially due to the litigation and challenges put up by ArcelorMittal before the National Company Law Tribunal’s (NCLT’s) Ahmedabad Bench.
Last month, the Hyderabad Bench of the NCLT ordered the exclusion of 87 days from the 270-day deadline due to the time consumed because of litigation in the Deccan Chronicle Holdings case.
Essar Steel is one of 12 large stressed asset accounts referred by the Reserve Bank of India (RBI) to the NCLT for resolution of bankruptcy proceedings. The company has an outstanding debt of Rs 492.12 billion.
The first round of bidding for the company, admitted under the Corporate Insolvency and Resolution Process of the Insolvency and Bankruptcy Code (IBC), was held on February 12, where the resolution professional disqualified Numetal and ArcelorMittal from bidding.
The resolution professional in this case is Satish Kumar Gupta of Alvarez & Marsal, and is being represented by former advocate general of Maharashtra, Darius Khambatta. There was no application from the resolution professional for extension of the existing deadline, said the source quoted above.
Both companies had initially raised objections against their respective disqualifications from the bidding process. Numetal and ArcelorMittal also filed several applications with the Ahemdabad Bench of the NCLT, challenging their disqualifications as well as each other’s eligibility.
Numetal has also filed an application seeking a stay on the second round of bidding till the matters are concluded. ArcelorMittal has alleged that its bids received differential treatment by Essar Steel’s RP when determining eligibility, as compared to when the JSW Steel and AION Capital combine received approval from the Committee of Creditors (CoC) in the Monnet Ispat and Energy case.
Last week JSW-AION’s bid for Monnet Ispat (Rs 114 billion debt) was approved by the CoC by a 98.97 per cent vote. The issue arises as the shareholding pattern of both companies is in contention with Section 29A of the IBC, which specifies persons not eligible to be resolution applicants. The section states that willful defaulters, or persons, managers or promoters of (including persons connected to) a company with a non-performing asset account cannot be eligible to bid for the stressed asset once the insolvency process begins and bids are invited.
ArcelorMittal has alleged that JSW Steel’s bid for Essar Steel should have been disqualified given that Seema Jajodia, sister of JSW group Chairman and Managing Director Sajjan Jindal, was an erstwhile promoter of Monnet Ispat. She had transferred her shares in October 2017. But she continued to be reflected as a promoter in the shareholding pattern uploaded on the stock exchanges for the quarter ended December 2017, while bids for Monnet Ispat bid were submitted on December 12. It was only on January 27 that a rectified shareholding pattern was uploaded on the exchanges.
Seshadri Rao, Group CFO and MD of JSW Steel said that the objections by ArcelorMittal against JSWs eligibility are entirely different to the reasons why ArcelrMittals bid was disqualifed. The allegations are incomparbale as JSW never owned any stake in Monnet, which is the opposite as compared ArcelorMittal being the promoter of Uttam Galva Steel.
“The application for promoter declassification [SEBI Takeover Regulations] has a column seeking details on promoter’s shares in encumbrance, pledged, non-disposal undertakings(ndu) etc. ArcelorMittal left this column blank when it sought to declassify itself as a promoter of Uttam Galva,” he said.