NCLAT upholds Electrosteel Steel Ltd's sale to Vedanta
New Delhi: The National Company Law Appellate Tribunal on Friday upheld the sale of Electrosteel Steel Ltd to Vedanta Ltd, saying the mining baron Anil Agarwal-led firm was eligible to bid for the debt-laden firm.
It rejected the contention of Renaissance Steel, a rival bidder for Electrosteel, that Vedanta was ineligible to bid under Insolvency and Bankruptcy Code as one of connected group firm - KCM in Zambia, had been found guilty of violating certain environmental laws, punishable with two or more years of imprisonment.
In its order, the appellate tribunal said that although Vedanta Resources PLC was convicted for the offence punishable under Section 91(1) of Zambia Act, which has provision for a fine or imprisonment for a term not exceeding three years or both, no directors was convicted for it.
"We hold that Vedanta Resources PLC, who is a connected person of Vedanta Limited is not covered by clause (d) of Section 29A of the I&B Code," said a NCLAT bench headed by Chairman Justice S J Mukhopadhaya.
It further said, "In view of the aforesaid findings, we hold that Vedanta Limited' is eligible and clause (d) of Section 29A of the I&B Code' is not attracted in its case.
Section 29 A of the IBC mandates that a person convicted for any offence punishable with imprisonment for two years or more is ineligible for submitting a resolution plan.
According to NCLAT, it is to be seen whether connected person', if an individual (natural person) has been punished or not.
"But no such allegation has been made that any of the Director of Vedanta Resources PLC' was convicted for the offence punishable with imprisonment of two years or more, the appellate tribunal observed.
Vedanta Ltd is a subsidiary of Vedanta Resources PLC' which holds 50.13 per cent equity in the company.
Vedanta Resource PLC' has another subsidiary, KCM', which has mining operations in Zambia's Copper belt and Central Provinces. Vedanta Resource PLC' holds equity of 79.4 per cent in KCM.
KCM' has been held guilty with regard to four offences relating to pollution on November, 2010 by the Subordinate Court of First Class for the Chingola District Holden at. Chingola, Zambia for which three counts fine has been imposed. On May 30 this year NCLAT had allowed Vedanta Ltd to make an upfront payment of Rs 5,320 crore to lenders for acquisition of Electrosteel Steels.
However, it had said that this payment would be subject to the outcome of the petition filed by Renaissance Steel challenging Vedanta's bid.
The bench had said that if Renaissance Steel wins the case, then the Committee of Creditors (CoC) will have to return the money to Vedanta. Electrosteel Steels owes lenders more than Rs 13,000 crore, of which about Rs 5,000 crore is to State Bank of India alone.