The two bidders for Essar Steel — ArcelorMittal and Nu Metal and Steel — have expressed confidence that they are fully eligible for acquiring the bankrupt asset even as questions are being raised about their compliance with the recent amendments made in the Insolvency and Bankruptcy Code.

The newly inserted Section 29A (c)in IBC states that an entity shall not be eligible to submit a resolution plan if it has an account that has been classified as non-performing asset. Such an entity shall be eligible to submit a resolution plan only if it makes payment of all overdue amounts with interest thereon, and charges relating to non-performing asset accounts before submission of the resolution plan.

In this context, the bid put in by Nu Metal and Steel could face a block because of the stake held by Rewant Ruia, the son of former Essar Steel-promoter Ravi Ruia. Nu Metal has been set up by Russian financial institution VTB Capital-led consortium where Rewant Ruia is a stakeholder. The consultant for Essar Steel bidding include Grant Thornton and solicitor firm Cyril Amarchand Mangaldas and they will scrutinise the eligibility of the bids before being opened by the committee of creditors. According to one source, the bid placed by Nu Metal could even be rejected.

Nu Metal spokesperson said they have not received any such information from the resolution professional or his legal advisors. “Nu Metal is an eligible resolution applicant and has submitted its resolution plan for Essar Steel,” he added.

ArcelorMittal was considered ineligible to bid because it held 29 per cent stake in Uttam Galva Steels which had defaulted on loan repayment. Anticipating trouble, a subsidiary of ArcelorMittal transferred its stake to other Uttam Galva founders before submitting the financial bid for Essar Steel.

A spokesperson of ArcelorMittal said the company does not believe there is any legal basis under which ArcelorMittal would not be considered eligible to participate in the resolution process. “ArcelorMittal was never the promoter of Uttam Galva and had no board representation nor was involved in the management of the company even before selling the stake.”