22 May 2019: Hearing a bunch of petitions against the March 8 order of the National Company Law Tribunal (NCLT) approving ArcelorMittal’s Rs 42,000-crore resolution plan for the debt-ridden Essar Steel, the National Company Law Appellate Tribunal (NCLAT) on Tuesday reserved its order.
The two-member bench, headed by Chairman Justice SJ Mukhopadhaya, has heard all parties, including the erstwhile promoters of Essar Steel and a host of operational creditors over the period. On Tuesday, it asked all parties, including ArcelorMittal, to file in writing their submissions by Wednesday.
During Tuesday’s proceedings, senior advocate Kapil Sibal appearing on behalf of Standard Chartered Bank, a secured creditor of Essar Steel, said ArcelorMittal should not be allowed to add working capital to brighten up its final resolution plan. “Working capital is revenue generated from going concern. It cannot be added. You can’t adjust working capital. ArcelorMittal cannot touch it. It’s not their money. ArcelorMittal’s argument that it is an accounting thing cannot stand here,” Sibal said, adding that given the company has earned a Rs 4,000-crore operating profit during the resolution period, ArcelorMittal’s bid should be nothing less than Rs 46,000 crore.
“ArcelorMittal is only giving Rs 43,000 crore, which means it is taking away Rs 3,000 crore,” Sibal said. Senior advocate Harin P Rawal, appearing for Essar Steel Asia Holdings, a shareholder of Essar Steel, raised the issue of ineligibility of ArcelorMittal under Section 29 (A) of the Insolvency & Bankruptcy Code. ArcelorMittal chairman and CEO LN Mittal had stakes in two defaulting firms owned by his brothers as a promoter, he said.
“Whatever be the share, the fact is that he (LN Mittal) was holding share as a promoter and hence he is ineligible under section 29 (a) of IBC,” he said.
Senior advocate UK Chaudhary, appearing for Prashant Ruia, said Rs 3,495-crore profit earned by Essar Steel during the resolution period should go to lenders. Essar Steel, which runs a 10-million tonne steel mill in Gujarat, owes over Rs 49,000 crore to over two dozen banks led by State Bank of India.
Insolvency petition against Essar Steel was admitted by the NCLT, Ahmedabad, on August 2, 2017. Essar Steel lenders had on October 25, 2018, voted in favour of ArcelorMittal’s offer of upfront payment of Rs 42,000 crore to the lenders and an additional Rs 8,000 crore towards capital expenditure.
A day after, the promoters of Essar Steel had offered to pay Rs 54,389 crore towards a full settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of Essar Steel. —FE