In a victory of sorts, ArcelorMittal’s `42,000-crore resolution plan for the bankrupt Essar Steel received a conditional nod from the National Company Law Appellate Tribunal (NCLAT) on Monday.
A two-member bench, headed by justice SJ Mukhopadhaya, said the acceptance of the resolution plan submitted by ArcelorMittal will be subject to its final order in the appeal filed by the Essar Steel promoters and Standard Chartered against the move.
It also said there is no stay on disbursal of the funds among financial and operational creditors of Essar Steel.
“We are not going to interfere with the approved resolution plan. There will be no setting aside of the approved order on the ground of discrimination in the distribution of funds. If there is indeed any discrimination, we will redistribute it,” the bench said. The NCLAT will hear the matter again on March 27.
To deal with the issue of discrimination, the NCLAT said it would deal with some questions pertaining to law like, whether a guarantor could be grouped in the same bracket as that of a financial creditor and whether a distinction could be made in the categorisation on the basis of related or non-related party among operational creditors.
The NCLAT also asked the Insolvency and Bankruptcy Board of India (IBBI) to file a reply on the average pay out on the distribution of funds between financial and operational creditors in the approved resolution cases so far.
The go-ahead to the resolution plan for the bankrupt firm comes almost 20 months after the insolvency petition against the company was admitted by the Ahmedabad bench of National Company Law Tribunal (NCLT) on August 2, 2017.
The NCLAT had on Friday refused to stay the order of the Ahmedabad bench of the NCLT, which had approved ArcelorMittal’s resolution plan, but had sought a fresh plan for the distribution of bid amount between financial and operational creditors of the bankrupt firm.
The NCLAT bench had 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.
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.
If the ArcelorMittal plan is implemented, Standard Chartered will get `60 crore against its claims of `3,187 crore from Essar Steel.
As is known, Essar Steel directors had challenged the NCLT’s approval of ArcelorMittal’s plan for the bankrupt company on the pretext that their offer of `54,389 crore was superior as it clears 100% outstanding of both financial and operational creditors.
Standard Chartered had also moved the NCLAT against the plan as its counsel contended that the bank was being given only 1.7% of its total dues from Essar Steel while other financial creditors, forming part of the CoC, were getting over 85% of their dues.
Last week on Thursday, the NCLAT had told Essar Steel Asia Holdings (ESAH) that its `54,389-crore resolution plan would only be considered only if the entity cleared the Essar group’s entire bad debt which runs into `80,000-85,000 crore.
Source: Financial Express, March 19,2019