While a section of bankers feels the bids of ArcelorMittal and Numetal Mauritius should be scrapped and fresh applications sought, the other camp is of the view that both the bids should be evaluated after advisories to both the aspirants on certain technical issues.

According to the bankers close to the bankruptcy resolution process, a meeting to decide the future course of action will be held later this week.

The bankers, who favour scrapping of the bidding process, observe that the bids by Numetal and ArcelorMittal have legal infirmities as both were associated with firms that are under the hammer as bankrupt companies and therefore should be debarred under the Insolvency and Bankruptcy Code. They feel that going ahead with these two bids will attract legal challenges which will stymie the auction and it is, therefore, better to opt for fresh bidding.

However, the other school feels that both the bids should be considered and technical flaws in their bids addressed. This will mean that the Mittals will have to resolve the Uttam Galva insolvency issue by paying back dues of that firm and Numetal will have to junk Rewant Ruia as an ally.

Uttam Galva has already made a one-time settlement application offering to pay back its dues by March-end after a 50 per cent haircut in total dues, which include original loan and interest. A decision on this has to be taken by the consortium of lenders led by the State Bank of India.

ArcelorMittal, the Luxembourg-based steel giant, has transferred its 29.1 per cent stake in Uttam Galva Steels to other founders, a move that may not be enough to beat the bankruptcy code, which bars firms that are promoters in bankrupt companies from bidding for other stressed assets. Therefore, the offer by Uttam Galva to settle its dues and its acceptance assumes great significance.

Numetal has also hinted that in case there was a legal infirmity because of Rewant Ruia's 25 per cent share in the consortium bidding for Essar Steel, it is ready to buy out the Ruia scion's stake. The issue of legal infirmity arises because Rewant, son of Ravi Ruia, could be considered a related party under the IBC, which disallows bids by parties related to promoters of bankrupt firms.

"It would be best to start with a clean slate. Let the Mittals settle the Uttam Galva issue and let Numetal settle its related party issue by buying out Rewant Ruia and bid once again. By that time other steel players may also get interested and we may attract even better bids," the bankers close to the resolution process said.

Bids for Essar Steel were submitted on February 12 and lenders have yet not been able to decide whether to go ahead with evaluating the bids or to junk them and call for re-bids.