16 March 2019: “Our reputation is at stake because of this case. It has been more than 500 days (since the insolvency proceeding began)“, Chairperson Justice SJ Mukhopadhaya of the NCLAT yesterday exclaimed while hearing a batch of appeals moved against the approval of ArcelorMittal’s resolution plan for Essar Steel.
“We are going to hear the case“, he added as he laid down certain broad parameters such as equitable distribution of the money, maximization of Essar’s assets and payment of statutory dues etc, on which ArcelorMittal’s Rs. 42,000 crore resolution plan would be tested.
A two-member Bench headed by Justice Mukhopadhaya has, therefore, directed ArcelorMittal to prepare a chart suggesting an “equitable” distribution of the money promised in the resolution plan among all the creditors of Essar Steel.
Standard Chartered Bank, has challenged that March 8 order of the National Company Law Tribunal Ahmedabad Bench approving ArcelorMittal’s resolution plan for Essar Steel, on the ground that the approval process adopted by the Committee of Creditors was illegal.
Appearing for Standard Chartered Bank, Senior Advocate Kapil Sibal contended that the CoC lead by the State Bank of India formed a ‘core committee’ which did not consult it while approving the resolution plan.
He further submitted that as opposed to other financial creditors of Essar getting as much as 92% of their claim, Standard Chartered was merely offered 1.7% which amounts to Rs 60.71 crore. The total amount due to Standard Chartered was nearly 3,400 crore.
Had there been a pro rata distribution, Standard Chartered would have received 85.6%, Sibal said.
It was also alleged that ArcelorMittal has reduced its proposal of payment of Rs 42,000 upfront amount to Rs 39,500.
Replying to the Standard Chartered’s appeal, ArcelorMittal stated that issues of distribution of the money were between the CoC and the operational creditors and it had no role to play in it.
Appearing for ArcelorMittal, Senior Advocate Harish Salve stated,
“How the operational creditors divide it amongst themselves, I do not know. It’s between the CoC and the creditors. I have given everything to the CoC.”
The Appellate Tribunal was also informed that apart from the upfront investment of Rs 42,000, ArcelorMittal has also made an additional investment to meet the requirement of Essar’s employees, small operational creditors and working capital infusion to run the plant.
“We have invested Rs 196 crore to clear dues of up to Rs 1 crore owed to small unsecured operational creditors; Rs 18 crore was spent on workmen and employees of Essar.”
After hearing Standard Chartered and ArcelorMittal, the Court asked the CoC to consider “cutting 10% of its share” for a more “equitable” resolution plan.
“Either you exercise your power, or we will“, the Appellate Tribunal said as it reiterated that a resolution plan which is discriminatory towards any creditor is liable to be set aside.
Meanwhile, the Appellate Tribunal also heard submissions made by the erstwhile Directors of Essar Steel, Prashant Ruia, Dilip Oommen, and Rajiv Bhatnagar, against the approval of ArcelorMittal’s resolution plan. Senior Advocate Mihir Thakore stated that the Directors did not get a copy of the resolution plan while it was being considered by the CoC in its meetings.
Stating that the resolution plan has already been approved and the Directors should have objected at the relevant time, Justice Mukhopadhaya said,
“You have a bad case. You have a rotten case.“
The CoC was represented by Senior Advocate Ravi Kadam.
The matter would be heard next on March 18.