16 March 2019: The National Company Law Appellate Tribunal (NCLAT) told Essar Steel Asia Holdings (ESAH) to withdraw its appeal against the rejection of its Rs 54,389-crore offer for Essar Steel, possibly making it harder for the Ruias to regain control of the asset. However, the tribunal said ESAH may be heard during a parallel appeal against the approval of ArcelorMittal’s Rs 42,000-crore resolution plan.
The Ahmedabad bench of the National Company Law Tribunal (NCLT) had in January rejected ESAH’s plea to consider its bid, taking Essar Steel out of the bankruptcy process. Under the Insolvency and Bankruptcy Code (IBC) only the lenders that had moved NCLT could withdraw Essar Steel from the process, the bankruptcy court had said.
“No application should have been entertained,” said the two member NCLAT bench led by justice SJ Mukhopadhaya on Friday. “You can withdraw it and argue the main case (against the ArcelorMittal plan).” ESAH may not do so, according to sources close to the entity, but there’s been no official word on this.
The bench also asked Essar Steel’s committee of creditors (CoC) to consider modifying the distribution of funds under the ArcelorMittal plan.
This will involve treating Standard Chartered Bank, which has also opposed the plan, on par with other financial creditors.
It suggested that 10% of the payment offered by ArcelorMittal be used to pay operational creditors with dues of more than Rs 1 crore. ArcelorMittal has already agreed to make whole operational creditors of Essar Steel with dues under Rs 1 crore over and above its 42,000 crore bid.
“It cannot be that you (other financial creditors) get 92% (of your dues) and they (Standard Chartered) get 1.7%,” said Mukhopadhaya, adding that operational creditors have to be given the same or similar treatment. Standard Chartered stands to get only Rs 60 crore against its claims of Rs 3,187 crore from Essar Steel under the ArcelorMittal resolution plan.
A pro-rata distribution of the ArcelorMittal bid amount to all financial creditors will lead to each lender receiving 85.6% of its dues.
“You cannot classify (financial creditors) on the basis of secured and unsecured,” said the bench, adding that operational creditors had to be given similar treatment. “Talk to the financial creditors, either 85.6% (pro-rata payment) or it will go (be liquidated) or we will modify the resolution plan. Please consider 10% (of the bid) to go to the operational creditors which have dues of over Rs 1 crore.”
Categories: General News