The tribunal observed that the CoC and RP had not followed the due process while deciding on the eligibility of bids
The Ahmedabad bench of the National Company Law Tribunal (NCLT) on Thursday put the ball back in the committee of creditors' (CoC) court by ordering it and the resolution professional (RP) of Essar Steel to re-examine the eligibility of the two bids submitted in the first round.
The tribunal, in its ruling, observed that the CoC and RP had not followed the due process while deciding on the eligibility of Numetal and ArcelorMittal bids. It has also extended the deadline for the resolution of Essar Steel's asset under the Insolvency & Bankruptcy Code (IBC) by 30 days to include the period of litigation.
With this judgement, the second round of bidding that was initiated last month has become invalid and could see Anil Agarwal promoted Vedanta and Sajjan Jindal-owned JSW Steel (which had joined Numetal as an investor) out of the fray.
The tribunal said there was violation of Section 30(4) of the IBC by the CoC in terming the bids ineligible. Under this section, a motion has to be passed through a vote supported by at least 75% the lenders.
The tribunal has directed the bids to be presented before the CoC for reassessment of eligibility of the two bidders.
A Numetal spokesperson said in its original bid the resolution plan was "both industrially and financially" compelling.
"We have put forth a very compelling resolution plan both industrially and financially. We hope our proposal will be considered by the CoC with a fair and holistic view," he said.
ArcelorMittal spokesperson said that they had always maintained that the company's bid was eligible.
"We have always maintained that we are eligible to bid for Essar Steel and are pleased to see that the NCLT wants our offer to be presented to the committee of creditors. ArcelorMittal in partnership with Nippon Steel and Sumitomo metals is the most credible bidder for Essar Steel and will bring considerable value to the India steel industry. We had made a strong and competitive offer backed up by a detailed industrial plan and now hope for a swift resolution for Essar Steel," he said.
A legal expert, who spoke off the record, said one had to see on what basis the tribunal has asked the CoC and RP to relook at the eligibility of the bids, which were essentially found ineligible under Section 29A of the IBC.
"We need to see what is the finding that the NCLT has rendered while remanding them (bids) back under CoC. The ineligible will be reassessed by the CoC now depending upon what the NCLT has given in the order today," he said.
According to another expert said the tribunal has given specified time period to the reolution applicants for "rectification of defects" in the bid.
"For instance, if the applicants in round one is suffering from some deficiency or defects in terms of eligibility then he can rectify defect and come back. There is a huge debate on eligibility criteria and that remains unanswered," he said.
According to him the merits of eligibility of bid have not been covered in the order.
"In my view, it is basically a long haul. it has already become very litigative and so very complicated," he said.
KNOTTY ISSUE
- The tribunal observed that the CoC and RP had not followed the due process while deciding on the eligibility of bids
- The tribunal has directed the bids to be presented before the CoC for reassessment of eligibility of the two bidders
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 "Essar Steel")
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