ArcelorMittal told the Supreme Court it would lift the escrow on Rs 7,000 crore and pay the money owed by Uttam GalvaNSE 3.86 % and KSS Petron, companies in which LN Mittal is classified as promoter, if it gets to bid successfully for Essar SteelNSE 0.00 %. “If the bid is accepted, I will pay, it is big business — you can’t go back on your word,” senior advocate Harish Salve told the bench, comprising Justices RF Nariman and Indu Malhotra, on Thursday.
The National Company Law Appellate Tribunal (NCLAT) had on September 7 asked the company to pay the money before it could bid for the ailing Ruia-founded company.
Arcelor had said the money was in an escrow account but had not been allowed to bid, prompting it to move the top court. Salve said Arcelor had “deep pockets” and had made provisions for the money.
“But we can’t pay for them (Uttam Galva, KSS dues) under the law. It will immediately become taxable income in the hands of the company if I pay without any consideration,” Salve said. “We have to arrive at a structure. You say pay — we will. But it is not as easy as that. Sufficient provision (for payment of debt) should be treated on par with payment. These are listed companies. There are regulatory hurdles in payment.” Some structure has to be worked out, he said, to facilitate the payment.
He also criticised the rival bid for Essar Steel by Numetal, saying that the promoters had at least Rs 45,000 crore by way of nonperforming assets (NPAs) in 2017. That would have gone up now with the principal and the interest. He said the money that Arcelor was offering would not be raised locally but from markets globally. “They will approach private equity funds,” he said.
Comparing the two bids, he contested the NCLAT order, which had dubbed the Rs 7,000 crore debt as a stigma. “Rs 7000 crore is my stigma. What about their Rs 45,000-crore stigma?”He said that Arcelor’s bid for Essar Steel was higher than that of Numetal, which he said was a way to allow the “promoters (Ruias) circle back in an opaque fashion.”
NCLAT had said Numetal would need to ensure that the consortium didn’t have any member of the Ruia family that founded theEssarGroup in order to be eligible to bid. The Insolvency and Bankruptcy Code (IBC) doesn’t allow the participation of bidders connected to companies that have defaulted on debt. Numetal has said it’s in compliance with the code.
ArcelorMittal submitted a fresh bid for bankrupt Essar Steel on Monday, in line with the NCLAT ruling. Lenders have decided to wait for the Supreme Court’s ruling on the eligibility of Numetal’s bid.
The revised offer by Arcelor-Mittal is pegged at Rs 42,000 crore, along with a commitment to repay the Rs 7,000 crore dues of the two companies, ET reported on September 11. Numetal has bid Rs 37,000 crore, while Vedanta’s offer is estimated at Rs 30,000-35,000 crore, according to sources.
Salve said Arcelor had no quarrel with the VedantaNSE 5.37 % offer. He also listed several loopholes in the insolvency law in this context and urged the bench to plug these. “Insolvency is not nationalisation. Insolvency is intended to get the maximum value for an asset,” he said. “Liquidation gets the minimum value,” he said, urging the court to allow for greater flexibility in the law. The committee of creditors should have more leeway in permitting companies to lift their disqualification if any, he said. There should be no interference by either the NCLT or NCLAT in the process of resolution, he said.
“The NCLAT is not an overseeing authority,” he said. Nariman agreed. “The process is wrong from the top to bottom,” he said.