The National Company Law Appellate Tribunal (NCLAT) on Wednesday directed Essar Steel’s resolution professional to convene a meeting of committee of creditors (CoC) to reconsider the distribution of the Rs 42,000 crore coming from ArcelorMittal’s resolution plan among financial and operational creditors, as suggested by the National Company Law Tribunal (NCLT).
Approving ArcelorMittal’s resolution plan in a March 8 order, NCLT’s Ahmedabad bench had suggested that lenders give 15% of the proceeds to operational creditors on a pro rata basis, but had left the decision entirely to their discretion while rejecting the claims by operational creditors.
NCLAT was hearing a plea moved by Standard Chartered Bank alleging that ArcelorMittal’s plan was “discriminatory”, and therefore, the distribution of funds should be stopped.
The two-member NCLAT bench headed by Justice SJ Mukhopadhaya said the CoC must reconsider the apportionment of fund and as such, a meeting of the lenders was warranted.
“We are not staying the impugned order of the adjudicating authority. It has to be implemented in letter and spirit,” the bench said, adding that it did not have any intent to stop implementation of the resolution process for Essar Steel.
However, it reiterated that if there was any discrimination in the distribution of funds, it would order modification in the apportionment.
Standard Chartered had moved the NCLAT against the plan as its counsel contended that the bank was being given only 1.7% of its total dues, while financial creditors were getting 92% of their dues back.
ArcelorMittal’s resolution plan involves financial creditors getting `41,987 crore out of their total dues of `49,395 crore. Operational creditors, under the plan, would get `214 crore against the outstanding of `4,976 crore. Standard Chartered will only get `60 crore against its claims of `3,187 crore from Essar Steel.
The NCLAT observed that financial creditors should not “have all the flesh and leave the bones” for others. It has scheduled to hear the matter next on March 27.
The appellate tribunal had earlier suggested that all operational creditors below `1 crore should get 100% of the dues and so should the employees of Essar Steel. Only 90% of `42,000 crore should be allowed for financial creditors, leaving 10% for the operational creditors.
Source: Financial Express, March 21, 2019