Essar Steel insolvency case: SC clears decks for ArcelorMittal's bid

Court rejects operational creditors' plea to be heard at tribunal, says promoters acting through them

The Supreme Court (SC) on Monday dismissed a plea by 28 operational creditors of Essar Steel seeking to be heard by the National Company Law Tribunal (NCLT) before any decision was taken on ArcelorMittal’s bid for the company. The court also rejected their plea seeking a stay on the National Company Law Appellate Tribunal’s (NCLAT’s) order asking the NCLT Ahmedabad Bench to take a decision on ArcelorMittal’s bid by February 11.

Now, the NCLT will be able to decide the fate of ArcelorMittal’s bid quickly.

The court was of the opinion that the promoters of Essar Steel were acting through the operational creditors to delay the insolvency process. It said 571 days had passed since the insolvency process began for Essar Steel, and it must not be delayed. The deadline for an insolvency process is 270 days.

Operational creditors such as Indian Oil Corporation and the Gujarat government had moved court, claiming dues of Rs 3,500 crore and Rs 500 crore, respectively.

In its order, the NCLAT had said only a representative of the operational creditors could be given the opportunity to raise any objections to ArcelorMittal’s resolution plan for Essar Steel.

On Monday, the NCLT, while reserving its order on the objections raised by operational creditors, asked all of them to give a written submission by February 13. 

Essar’s committee of creditors (CoC) had earlier argued in the NCLT that all operational creditors with dues of less than Rs 1 crore would together get Rs 196 crore. Those with dues of Rs 1 crore or more would get a token Rs 1.

If Essar went into liquidation, however, the operational creditors would get nothing. So, ArcelorMittal’s Rs 42,000-crore bid was the best option for them. The CoC’s counsel told the NCLT that they had tried to ensure that operational creditors would not get less than what they were entitled to during liquidation.

On Tuesday, the NCLT will continue hearing arguments of Essar Steel’s suspended management led by petitioners, promoter Prashant Ruia, former managing director Dilip Oommen, and former project director Rajiv Kumar Bhatnagar. They are seeking a copy of ArcelorMittal’s resolution plan.

All eyes on NCLAT

The NCLAT had on February 4 asked the NCLT to start hearing ArcelorMittal’s resolution plan, submitted under Section 31 of the Insolvency and Bankruptcy Code (IBC), and decide on the matter by February 11 (Monday). If this did not happen, said the NCLAT, it would take over the matter and decide on it by February 12 (Tuesday). 

Meanwhile, Essar’s promoters have also moved the NCLAT against NCLT's January 29 order rejecting their Rs 54,389-crore debt-settlement offer. It is likely to be heard on Tuesday as well.