‘Curbs on VTB no bar to Essar bid’

Political sanctions have no place under insolvency code, says NuMetal

NuMetal argued in the Supreme Court on Tuesday that international “political sanctions” against Russia’s VTB Bank had no place in the Essar Steel auction under the Insolvency and Bankruptcy Code (IBC).

“In foreign policy, friends become foes and foes become friends… this is a measure of foreign policy of a particular group of countries called the EU (European Union). Russia is frowned upon by a comity of nations,” senior advocate Mukul Rohatgi, for VTB-backed NuMetal, submitted before a Bench of Justices Rohinton Nariman and Indu Malhotra.

Mr. Rohatgi was referring to the EU restrictions on Russian entities for destabilising the Ukraine. He said the issue would not constitute a disqualification under Section 29A of the IBC. The IBC bars a person or anyone acting in concert from submitting a resolution plan if he is prohibited from trading by SEBI or similar restrictions abroad.

Mr. Rohatgi also argued that there was no “taint” associated with Rewant Ruia, son of Essar Steel’s Ravi Ruia.

NuMetal’s first bid for Essar Steel was found ineligible as the firm was 25% owned by Rewant Ruia. Mr. Ruia, however, left the firm before the second round bid was submitted in March.

‘Bid rejection wrong’

“Not only was the first bid fine, the second bid was completely fine. The authorities were wrong in rejecting our first bid as there is no taint attached to Rewant Ruia. NuMetal had no taint attached to it. NuMetal by itself was not a promoter.

“NuMetal could not have been disqualified just because one of its shareholders was a relative of Essar Steel promoter Ravi Ruia. The eligibility of the applicant should be taken into consideration and not the eligibility of its shareholders. So, if there are 5,000 shareholders, are they going to look into the eligibility of each one?” Mr. Rohatgi argued. The apex court will continue to hear the final arguments on Wednesday.

This is an appeal filed by ArcelorMittal against a National Company Law Appellate Tribunal (NCLAT) decision allowing rival NuMetal to place second round bids worth ₹37,000 crore for Essar Steel.

The NCLAT, on the other hand, ordered the Luxembourg-based ArcelorMittal to first clear ₹7,000 crore dues of its previously associated subsidiaries in order to qualify to bid.

The appellate tribunal, in a September 7 order, had held that NuMetal’s ₹37,000 crore in second-round bid for Essar Steel was valid. The NCLAT held that ArcelorMittal should first remove the “stigma of defaulter” attached to it because of its previous 29% stake in Uttam Galva Steel and KSS Petron. The appellate tribunal also asked lenders, who are auctioning Essar Steel to recover over ₹49,000 crore of unpaid loans, to consider second round of bids by Numetal and Vedanta. Senior advocate Gopal Subramanium is appearing for the Committee of Creditors (CoC) in the case and is yet to make his submissions.

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