ArcelorMittal’s Rs 42,000-crore resolution plan for the debt-laden Essar Steel was on Friday approved by the Ahmedabad bench of the National Company Law Tribunal (NCLT). The promoters of Essar Steel, the Ruias, could appeal the ruling in the appellate tribunal or the Supreme Court. The two-member bench suggested lenders give 15% of the proceeds to operational creditors, on a pro rata basis, leaving the decision entirely to their discretion. Claims by operational creditors have been rejected.
Essar Steel’s bankruptcy proceedings have long crossed the 270- day deadline prescribed by the Insolvency and Bankruptcy Code (IBC); in fact it is now more than two years since the process began.
The bench also suggested the committee of creditors (CoC) consider Standard Chartered Bank’s claim be treated equally with those of other members of CoC under ArcelorMittal’s plan. Standard Chartered’s grouse is that it is being treated as a minor financial creditor and is due to receive only a little over Rs 60 crore against dues totalling approximately Rs 3,400 crore. The tribunal, however, added that ArcelorMittal was not required to make any further offer and that only the allocation method could be relooked.
Early on, various senior bankers had indicated to FE that Standard Chartered had voted against the ArcelorMittal resolution plan.
As many as 31 operational creditors of Essar Steel had moved the NCLT in five separate petitions urging that it direct the CoC to ensure full payment to them and take necessary steps to modify ArcelorMittal’s resolution plan for that. Alternatively, they urged the tribunal to direct the CoC to also consider the last minute offer of the Essar Steel promoters which promises to pay all creditors in full.
ArcelorMittal’s offer is a revision to the second round of bids that lenders and the resolution professional Satish Kumar Gupta had called for back in April after the first round of bids submitted by ArcelorMittal and Numetal, a company co-owned by Russia’s VTB Bank were found to be ineligible.
To be sure, this order does not mean an end to litigations related to the debt-laden company bankruptcy proceedings; Essar Steel promoters, the Ruias, have already moved the National Company Law Appellate Tribunal (NCLAT) against the NCLT Ahmedabad bench’s January order rejecting their plea offering an upfront cash payment of Rs 47,507 crore to all creditors, including payment of Rs 45,559 crore to the senior secured financial creditors under Section 12A of IBC introduced in 2018 by way of an amendment. Section 12A allows withdrawal of insolvency proceedings subject to approval by 90% of the creditors and NCLT.
An Essar spokesperson said soon after the verdict, “We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfills the IBC’s declared overriding objective of value maximisation, which has been established time and again by courts at all levels. We are also confident of the legal validity of our said offer made under Section 12A, which provides for the withdrawal from the IBC process by making full payment to the creditors. We are awaiting a copy of the NCLT order, and will take a call on next steps after examining the same.”
The offer from promoters came only a day after over 90% of the committee of creditors voted in favour of the bid by ArcelorMittal which has promised Rs 39,500 crore by way of cash upfront.
Other parties that the NCLT has ruled against could also challenge the tribunal’s order at the appellate tribunal, or even the Supreme Court.
Friday’s orders follow a directive from the appellate tribunal last week directing the NCLT Ahmedabad bench to decide on the Rs 42,000 crore resolution plan submitted by ArcelorMittal for Essar Steel by March 8, failing which it would take up the matter and pass orders itself.