NCLAT stays order on ArcelorMittal to pay for using slurry pipeline

As per earlier NCLT Ahmedabad Bench order, ArcelorMittal had to pay Rs 1,300 cr for using pipeline to run Essar Steel by Dec 15

The National Company Law Appellate Tribunal (NCLAT) has stayed the order directing ArcelorMittal to pay Rs 1,300 crore as corporate insolvency resolution process (CIRP) cost to Odisha Slurry Pipeline Infrastructure (OSPIL) for using its assets.

In an order passed on Friday, the appellate tribunal said that as an ad-interim, the order regarding payment by the appellant (ArcelorMittal India Private Limited) to OSPIL by December 15, 2020, shall remain stayed till the next date of hearing. The matter is listed ‘for admission’ on January 22.

The Ahmedabad Bench of the NCLT had passed a 322-page order on November 10 – on the basis of an application moved by Srei Infrastructure Finance, a financial creditor –which recognised the charges for the use of slurry pipeline for running Essar Steel as a going concern as CIRP costs. 

The payment was to be made by December 15, failing which, the NCLT could pass a liquidation order against Essar Steel. ArcelorMittal appealed in NCLAT against the order. 

Harish Salve, representing ArcelorMittal, argued that the appellant (ArcelorMittal India Private Limited) had been directed to make payment of charges as IRP costs to an entity which had not claimed it during the CIRP of Essar Steel India or even thereafter.

Commenting on the order, a Srei spokesperson said, “Everyone has the right to appeal against a judgment. However, even in the higher court, the final decision is always taken based on the merit of the matter. We are confident that the NCLAT shall be appreciating the relevant facts in its proper light during the course of the proceedings.”

The NCLT order that entailed an additional cost of Rs 1,300 crore came almost 11 months after ArcelorMittal acquired Essar Steel jointly with Nippon Steel Corporation in a Rs 42,000-crore deal under the insolvency law; Essar was subsequently renamed AMNS India.

OSPIL owns and operates a 253-km slurry pipeline, which is a critical asset for AMNS India. It connects AMNS India’s iron ore beneficiation plant in Dabuna with the 12-million tonne pellet plant in Paradip. It was leased to Essar and the arrangement captured in the right to use (RTU) agreement.

However, OSPIL landed up in NCLT and ArcelorMittal submitted a Rs 2,359 crore resolution plan, which was approved by the Cuttack Bench of the NCLT earlier this year. Srei Infra challenged it in NCLAT and a decision is pending. Incidentally, India Growth Opportunities Fund, a scheme of Srei Multiple Asset Investment Trust, held a 69 per cent equity in OSPIL while the balance was with Essar Steel.

According to Srei, if the payments were made in a timely manner, OSPIL would have serviced its debts due to its lenders and there would have been no occasion for it to be taken for insolvency as the lenders/shareholders of OSPIL would not have suffered any losses.  “The NCLT judgment simply recognised this reality in a fair and balanced manner,” the spokesperson said.

“Consequent to Essar's resolution, the successful resolution applicant ought to have paid the outstanding RTU charges as CIRP costs in terms of its own approved resolution plan,” the Srei spokesperson added.

TIMELINE

• December 2019: ArcelorMittal and Nippon Steel complete acquisition of Essar Steel
• March 2020: NCLT Cuttack Bench approves ArcelorMittal’s resolution plan for OSPIL
• November 2020: NCLT Ahmedabad directs RTU charges to be paid to OSPIL by ArcelorMittal Nippon Steel
• December 2020: NCLAT stays payment by ArcelorMittal to OSPIL by December 15 in an ad-interim order