While ArcelorMittal was quick to up the ante in the battle for Essar Steel in May by parking Rs 7,000 crore in an escrow account to clear the outstanding debt of two companies it previously held stakes in, the steelmaker is making it clear that it wants the dues repayment to be a conditional deal.
According to The Economic Times, the LN Mittal-owned company told the Supreme Court that it would lift the escrow on Rs 7,000 crore and pay the money owed by Uttam Galva and KSS Petron-the defaulting companies in which the steel tycoon is classified as promoter-if it gets to bid successfully for Essar Steel. "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.
Last week, the National Company Law Appellate Tribunal had ruled that ArcelorMittal's second bid for Essar Steel would be eligible only if it clears all outstanding dues. In response, the company had moved Supreme Court challenging this order on Wednesday, insisting that no bank had ever made a claim against it and that its promoters had offered no personal guarantees for any company.
According to Salve, Arcelor had "deep pockets" and had made provisions for the money. "But we can't pay for them [Uttam Galva, KSS Petron] under the law. It will immediately become taxable income in the hands of the company if I pay without any consideration," he explained, adding, "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."
The daily added that Salve also criticised Numetal's rival bid for Essar Steel, which got the NCLAT's nod, saying that the promoters had at least Rs 45,000 crore by way of non-performing assets in 2017, an amount that would have increased on account of accruing interest.
Referring to the NCLAT order, which had reportedly dubbed the Rs 7,000 crore debt as a "stigma", Salve told the apex court, "Rs 7,000 crore is my stigma. What about their Rs 45,000-crore stigma?" He further pointed out that ArcelorMittal's bid was higher than Numetal's, which he alleged was a way to allow the past "promoters [Ruias] circle back in an opaque fashion". He, however, said his party had Arcelor had no quarrel with the Vedanta offer.
Numetal's first bid had been rejected by Essar Steel's lenders due to the 25% share owned by Rewant Ruia, the son of Essar Steel founder Ravi Ruia, since he was deemed a related party. The Insolvency and Bankruptcy Code (IBC) doesn't allow the participation of bidders connected to companies that have defaulted on debt. JSW Steel bought out this contentious stake ahead of the second bidding round.
Incidentally, ahead of its Supreme Court challenge, ArcelorMittal had reportedly also sweetened its second bid to Rs 42,000 crore while Numetal's bid is pegged at Rs 37,000 crore and Vedanta's at Rs 30,000-35,000 crore. Essar Steel's Committee of Creditors (CoC) are awaiting the apex court's decision before announcing a highest bidder.
In light of his arguments against the rival Numetal bid, Salve listed several loopholes in the insolvency law and urged the bench to plug them. "Insolvency is not nationalisation. Insolvency is intended to get the maximum value for an asset," he said, urging the court to allow for greater flexibility in the law since "liquidation gets the minimum value".
According to him, the CoC should have more leeway in permitting companies to lift their disqualification, if any, without any interference by either the NCLT or NCLAT in the process of resolution. "The NCLAT is not an overseeing authority," he added.
And Justice Nariman agreed, saying, "The process is wrong from the top to bottom". For now there seems to be no end in sight for the Essar Steel saga, which boasts the third biggest debt pile (around Rs 49,000 crore) among the first 12 companies identified by the RBI for insolvency proceedings.