Section 12A of IBC doesn't apply to Essar Steel case, says ArcelorMittal

ArcelorMittal said on Thursday that Section 12A of the Insolvency and Bankruptcy Code (IBC), under which the Ruias have proposed to withdraw Essar Steel from the Corporate Insolvency Resolution Process (CIRP), did not apply to the debt-ridden company.

"Our understanding is that the IBC's Section 12A does not apply to the resolution process of Essar Steel. Section 12A clearly states that any application to withdraw must be submitted prior to the issuance of the invitation for expressions of interest and must be accompanied by a bank guarantee for the specified amounts," Arcelor said. 

"The expression of interest for Essar Steel was issued in October 2017. ArcelorMittal has complied with the Supreme Court order, we have settled the overdues of Uttam Galva and KSS Petron, and we have the bank guarantees in place for the payment for Essar Steel. We expect the process to continue in accordance with the clear terms of the IBC,” it said in a statement.

Sources close to Essar said Section 12A was introduced in June 2018 and for cases which were beyond the EOI stage, a reasonable view could be taken, that an opportunity should be given to all ongoing cases to withdraw from the CIRP by giving full recovery to secured lenders (with consent of 90 per cent of the lenders). “Our proposal offers maximum value to all stakeholders and provides 100 per cent repayment to the lenders.” Arcelor was selected as the preferred bidder by the CoC for Essar Steel after it cleared the dues of defaulting companies Uttam Galva and KSS Petron to become eligible for Essar. A source close to Arcelor added, “If the Ruias can afford to pay now they should have paid before. This desperate last attempt only serves to clearly demonstrate they are wilful defaulters.” Sources close to Essar said ArcelorMittal was misrepresenting the facts by saying it had paid the entire overdues of all related corporate debtors.