Essar Steel auction: After Numetal's 'illegal' jab, ArcelorMittal hits back

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After Numetal's majority shareholder VTB Capital termed ArcelorMittal's bid for Essar Steel 'illegal,' the Lakshmi Mittal-led company has hit back.

"Since when did it come to VTB to decide who is eligible and  who is not eligible," a source close to ArcelorMittal, the world's largest steelmaker, told Moneycontrol on Monday.

VTB Capital, a unit of Russia's VTB Bank, is the majority shareholder of the Numetal consortium. Both Numetal and ArcelorMittal have bid for Essar Steel, which is being auctioned.

The Essar Group company, owned by the Ruia family, had accumulated over Rs 50,000 crore in debt, and was referred to the National Company Law Tribunal by the Reserve Bank of India.

"ArcelorMittal may have taken legal opinion to say it's eligible to bid... but so have others," said the executive quoted above.

The auction is at a crucial juncture, with both bids being evaluated by consultancy firm Grant Thornton and law firm Cyril Amarchand Mangaldas.

While the resolution professional overseeing the auction was expected to meet the committee of creditors on Monday, sources said the meeting could be delayed.

The professional will present the eligible bids to the committee, which is comprised of lenders to Essar Steel.

While ArcelorMittal's bid is in question because of the company's investments in Uttam Galva, Numetal's has to prove that it's in the clear despite its minority shareholder Rewant Ruia's connection with the Ruia family.

Rewant Ruia is the son of Ravi Ruia, one of the co-founders of the Essar Group.

According to the amendment to the Insolvency and Bankruptcy Code, any company with investments in a defaulting firm is not eligible to bid.

“We are confident in the integrity of the process which will be adjudicated by the Resolution Professional," ArcelorMittal said in a statement issued later.

"We continue to believe our bid is eligible and that as the world’s leading steel company in partnership with Nippon Steel and Sumitomo Metals, we have unrivaled industry expertise and a demonstrable track record that is very relevant for Essar Steel India Limited," the company said.