Essar Steel's operational creditors move NCLT against ArcelorMittal

ArcelorMittal has emerged the highest bidder for Essar Steel, but it has not included operational creditors in its debt resolution plan to creditors.

Operational creditors (OC) of Essar Steel on Tuesday moved the Ahmedabad bench of National Company Law Tribunal (NCLT) for recovering dues worth more than Rs 3.74 billion.

Single-operational-creditor Orissa Stevedores Ltd and a set of 27 operational creditors filed two petitions under section 60(5) of Insolvency and Bankruptcy Code (IBC).

Ideal Movers Private Limited, Kamaljeet Ahluwalia, Arfin India Limited, Sakar Industries Private Limited, and Apex Commodities have asked the bench to "pass directions" to the Committee of Creditors (CoC) to ask the resolution applicant ArcelorMittal to match up the offer contemplated under the settlement proposal of Essar Steel Asia Holding Limited.

 ArcelorMittal has emerged the highest bidder for Essar Steel, but it has not included operational creditors in its debt resolution plan submitted to the CoC, making operational creditors wary about recovering their dues from the company.

The 27 operational creditors have sought dues worth Rs 3.6 billion, Orissa Stevedores is owed more than Rs 160 million. The operational creditors primarily comprise raw material suppliers like ferro Alloys, iron ore and fines, paints etc, logistics service providers among others.

The CoC on October 25 approved ArcelorMittal's plan offering Rs 420 billion upfront cash to lenders as against Rs 490 billion of Essar Steel's dues to banks. ArcelorMittal's plan offers Rs 2.14 billion to operational creditors, against Rs 49.95 billion of claims filed by them.

Further, Indian Oil Corporation (IOC) and Bharat Petroleum Corporation (BPCL) have also been classified as operational creditors in the Essar Steel case. According to the data submitted to the resolution professional, IOC's outstanding dues aggregate to Rs 37.62 billion, while that of BPCL are Rs 2.61 billion. Thus, the total outstanding for state-owned oil refiners is around Rs 40.24 billion, which is around 80 per cent of the total outstanding operational credit of Rs 49.76 billion of Essar Steel.

Standard Chartered (StanChart) Bank, another Essar Steel creditor, also raised objections to the ArcelorMittal plan, saying its dues have not been taken into account. The bank is getting only Rs 780 million, according to the plan cleared by the CoC, as against its dues of Rs 37.35 billion. StanChart has also moved the NCLT.

A last-minute Rs 543-billion plan by the Ruias offering full settlement to all creditors, including operational creditors, was not considered by the CoC on October 25, and lenders had already voted in favour of ArcelorMittal's offer. The Ruias' offer will now also be placed before the NCLT for its consideration, said a source close to the development.