Gujarat Energy Transmission Corp. Ltd (Getco) has challenged the recommendations of the committee of creditors to accept the resolution plan of ArcelorMittal to acquire Essar Steel Ltd. The Gujarat-government owned electricity transmission company has approached the bankruptcy court in Ahmedabad to recover its dues in excess of ₹827 crore from Essar Steel.
In an interlocutory petition filed a few days ago, Getco challenged the resolution professional and committee of creditors’ decision to ignore the dues of Getco. Sources had reported on 5 November that a few Gujarat government companies, including Getco and Gujarat Maritime Board (GMB), were set to lose ₹1,150 crore if the Ahmedabad bench of the National Company Law Tribunal (NCLT) accepts ArcelorMittal’s proposal to buy Essar Steel.
In 1995, Essar Power, promoted by the Ruia family, had built a 515 megawatt power plant at Hazira, Gujarat. Of the total, 300MW was purchased by the erstwhile Gujarat electricity board (GEB), under a power purchase agreement (PPA) signed between GEB and Essar Power.
For the rest of the 215 megawatts, a PPA was signed between Essar Power and Essar Steel.
Getco was a wholly-owned unit of the erstwhile GEB before the latter was reorganised on 1 April 2005 into seven companies with functional responsibilities such as generation, distribution, transmission and distribution.
The dues concern transmission and wheeling charges, according to the application filed before the National Company Law Tribunal by Getco. Sources has reviewed a copy of the application.
“We have followed the insolvency and bankruptcy code (IBC) process in good faith since first submitting our expression of interest (EOI) in 2017. The committee of creditors has clearly decided ArcelorMittal’s plan is in the best interests of Essar Steel and we are confident that the process will be implemented correctly and according to the law,” said an official at ArcelorMittal.
An Essar Steel official declined to comment.
The resolution plan submitted to the committee of creditors, led by State Bank of India, does not reflect the correct figure regarding the debt owned by the corporate debtor (Essar Steel) to Getco, according to the application reviewed by Sources.
“It is submitted that the decision of the RP to admit the claim of GETCO at ₹1 as against the claim amount of ₹827.18 crore is without the application of mind.” The application said the claim amount has risen to ₹896.52 crore as on 31 October.
When contacted, a state government official said other Gujarat companies, including GMB, are also looking to approach the NCLT to reclaim their dues to Essar Steel.
The dues of Getco are classified as operational creditors and ArcelorMittal’s offer has not made significant provisions for them, said Getco.
ArcelorMittal’s Essar Steel bid envisages upfront payment of ₹42,000 crore to lenders and additional ₹8,000 crore towards capital expenditure. The total admitted claims of operational creditors totals ₹4,995 crore. ArcelorMittal has offered to settle it at ₹214 crore.
On 25 October, more than 92% of creditors of Essar Steel voted in favour ofhanding over debt-laden Essar Steel to ArcelorMittal. On 30 October, the resolution professional had filed ArcelorMittal’s plan before the NCLT’s Ahmedabad bench for final approval.
As many as 29 operational creditors have approached the bankruptcy court last week claiming settlement of their dues of up to ₹600 crore. The operational creditors have sought the NCLT’s intervention in considering the settlement plan offered by Essar Steel promoters.
The resolution plan of ArcelorMittal provides no payment to operational creditors, whose outstanding dues are over ₹1 crore, according to the applications by the operational creditors which claims that the proposal submitted by the shareholders and board of Essar Steel provides for paying the dues to operational creditors in full.
Unsecured creditors, including Standard Chartered Bank and Deutsche Bank, have also approached NCLT as dissenting financial creditors, challenging the RP’s and COC’s decisions to approve ArcelorMittal’s Essar Steel bid.
Source: Livemint, November 18, 2018