Mumbai: The US government has filed court papers supporting the proposed $2.6 billion sale of Asarco LLC, the bankrupt copper mine, to Sterlite Industries Ltd, and said the offer from Asarco parent Grupo Mexico was "defective."

Asarco, which owns three copper mines in Arizona, went bankurupt in 2005 after it failed to pay up $1 billion for environmental clean-up and asbestos claims.

While Grupo Mexico owns 100 per cent of Asarco's equity, it does not have board representation of the bankrupt subsidiary.

Sterlite, a part of the London-based Vedanta Resources Plc, had in May offered to buy the operating assets of Asarco in an all-cash deal.

Grupo Mexico, which made an alternate bid to block the sale of its subsidiary, promised "full recovery" for its creditors.

The US government filed court papers in US Bankruptcy Court in Corpus Christi, Texas, a day ahead of a hearing to approve the sale procedures for Asarco.

"The Sterlite bid was the highest, and the benefits of a higher cash bid directly result in more funds being made available to clean up properties contaminated by (Asarco's) historic operations," the US government said in the filing.

The government said it filed the court papers on behalf of the US Environmental Protection Agency, the US Interior Department and the US Agriculture Department, and Montana, Washington, Oklahoma, Kansas and Missouri.

The government also asked the court to reject Groupo Mexico's demands for dropping the provision for a $52 million break-up fee for Sterlite if the deal was not completed.

"The United States believes the parent's proposed plan is not a full payment plan, has significant defects, and does not support rejection of the break-up fee," the government said in the filing.

"In practical terms, the parent's proposed plan is simply a litigating plan that would prevent (Asarco) from entering into reasonable settlements on the largest claims and, instead, require them to be litigated to conclusion through all appeals."

The government also said a rejection of the break-up fee or other protections for Sterlite's offer would drive the company and other possible bidders away from bankrupt Asarco.

The Grupo Mexico unit that owns the Asarco's shares filed an objection to the proposed sale to Sterlite, saying the bidding procedures were unfair and it failed to value Asarco properly.

Groupo Mexico offered to make a cash deposit of $500 million, provide an additional guaranty of up to $440 million, pay all claims in cash to the full amount set by the court, reinstate Asarco's bonds, and pay interest on claims.