Renaissance Steel questions Tata Steel, Vedanta’s eligibility for Electrosteel bid
Renaissance Steel has questioned the eligibility of Tata Steel and Anil Agarwal-run Vedanta to bid under the bankruptcy process alleging the move to be a breach of the law, reported Economic Times.
“One of the resolution applicants in Electrosteel has already raised formal objections regarding the eligibility of Tata Steel and Vedanta and we are looking into the matter. The resolution professional is seeking legal opinion,” a person aware of the matter told the paper. “We have also asked the resolution professional to seek an explanation from the bidders and examine the matter.”
Renaissance, in a letter, asked the Committee of Creditors for Electrosteel Steels whether allowing Vedanta and Tata Steel to bid would amount to a violation of existing laws.
Section 29A (d) of the Insolvency and Bankruptcy Code (IBC) prohibits bidding by entities that have been found guilty and handed out sentencing under criminal laws.
According to the law, if any of subsidiary company gets convicted for an offence punishable for more than two years, the parent company will not be eligible to submit bids. Sources told the paper that subsidiaries of both Tata Steel and Vedanta have been convicted in the UK and Zambia, respectively, and hence they should be disqualified.
Tata Steel and Vedanta did not comment.
In the letter, reviewed by Economic Times, Renaissance had written about cases reported against Tata Steel UK and Vedanta Resources. Section 29A(d) of the IBC says that a person shall not be eligible to submit a resolution plan, if such a person or any other person acting jointly or in concert with such a person has been convicted for any offence punishable with imprisonment for two years or more.
Tata UK has been facing prosecution in ‘Hull Crown Court’ for breaching statutory provisions of Health and Safety at Work Act, 1974. And, a subsidiary of Vedanta Resources, Konkola Copper Mines (KCM), was convicted for breaching the statutory provisions of the Environmental Protection and Control of Pollution Act 1990 by the government of Zambia for pollution and harm caused to the environment in November 2010.
“This has significant implications on the whole resolution process. We are trying to find out whether these claims will hold true under the IBC. We received the submission only on Thursday last week. So it is too early to determine whether Tata and Vedanta would have to be disqualified because of the clause,” another executive involved with the bidding told the paper.
Of the four bidders, Vedanta Group had emerged as the highest bidder for Electrosteel Steels by quoting Rs 4,500 crore, while Tata Steel’s bid was worth Rs 3,500 crore. Renaissance Group and Edelweiss Asset Reconstruction Company were the other two bidders.
Electrosteel Steels owes more than Rs 13,000 crore to lenders and Rs 191.6 crore to operational creditors.