How NCLT's Rejection of Ruias' Offer for Essar Steel has turned the tide for Arcelor Mittal?

In the latest update in insolvency case of Essar Steel, Ahmedabad bench on NCLT (National Company Law Tribunal) has rejected Ruias' offer of INR 54,389 crore to regain control of the company. The tribunal has rejected Ruias' bid saying that the offer violates Section 12A of the Insolvency and Bankruptcy Code (IBC).

Section 12A of IBC (that was introduced in June 2018) states that any application to withdraw the case from insolvency process must be submitted prior to the issuance of the invitation for expressions of interest (EOI) and must be accompanied by a bank guarantee for the specified amounts and in case of Essar Steel, the EOI was issued in October 2017.

However, the Essar Group has hinted at challenging the tribunal's decision citing to NCLAT (National Company Law Appellate Tribunal) or Supreme Court citing Supreme Court's last week order that upheld the August 2018 amendment to the IBC law of Section 12A that allows creditors to take the company out of insolvency proceedings and allows out-of-court settlement with an upfront payment of the dues. But Section 12A of IBC also mentions that the promoters can take back control of their insolvent company with the approval of 90% creditors' vote share which means that the tables have turned for Essar promoters.

The NCLT also said that there is no illegality in the decision taken by the Committee of Creditors (CoC) on selecting ArcelorMittal. The bench said only the applicant who had initiated the insolvency proceedings can seek a withdrawal. The State Bank of India and Standard Chartered Bank had moved the bankruptcy court against Essar Steel.

The CoC approved bidder of Essar Steel, Arcelor Mittal has responded in a statement that "We welcome the ruling by the NCLT which protects the integrity of the IBC and ensures its legitimacy as a rules-based law. This is a positive development for both Essar Steel India and the country more broadly. We hope now for a swift resolution to this case."

If not challenged by Ruias', this may finally close the insolvency proceedings of Essar Steel which is one of the biggest 12 accounts that the RBI had in June 2017 referred to the NCLT.

LM Mittal-run ArcelorMittal, which is the world's largest steel maker, to the country which is one the fastest growing markets for the alloy. His earlier attempts to enter Indian steel circuit through joint ventures-Uttam Galwa and KSS Petron ended up as failures. However, the group is trying hard to enter India through Essar Steel and has offered to pay INR 42,000 crore.