StanChart alleges Essar Steel CoC accepted lower bid from ArcelorMittal

CoC clubbed Odisha Slurry Pipeline debt with Essar Steel, diverted Rs 2,500 crore, alleges StanChart

Reiterating its claim that the Essar Steel’s Committee of Creditors (CoC) had treated it unfairly, Standard Chartered Bank (StanChart) on Monday told the National Company Law Appellate Tribunal that lenders had accepted Rs 39,500 crore from ArcelorMittal instead of Rs 42,000 crore-bid, as approved earlier.

During the hearing on Monday, StanChart alleged that the CoC had clubbed the debt of Odisha Slurry Pipeline Limited with Essar Steel in the auction to recover unpaid loans, which would in effect reduce the up-front payment to be made by ArcelorMittal. This in turn, Senior Advocate Kapil Sibal appearing for StanChart said, would mean lower amount for the financial creditors who were not part of the core of CoC.

“They short-changed us to benefit themselves. The plan proposed Rs 42,000 crore plus working capital and not Rs 35,000 crore plus working capital, which has been accepted by the CoC,” Sibal told the NCLAT. An amount of Rs 2,500 crore, which should have been paid to Standard Chartered, has been diverted to lenders of Odisha Slurry Pipeline India Ltd, which owns the slurry pipeline, he said.

Questioning the authority of the members of CoC, who he alleged had held private and unauthorised negotiations with ArcelorMittal, Sibal said that such private deals are detrimental to the interests of stakeholders of Essar Steel. “The CoC is empowered only to accept or reject a bid. How can it negotiate on behalf of other creditors,” Sibal said.  The NCLAT will continue hearing StanChart on Tuesday.

StanChart has approached the NCLAT alleging that the CoC had discriminated against it, as the bank was being offered only 1.7 per cent of its total dues from Essar Steel’s resolution plan, while other financial creditors, forming part of the CoC, were getting over 85 per cent of their dues.

Apart from StanChart, NCLAT is also likely to hear a majority shareholder of Essar Steel, which had moved the NCLAT seeking rejection of ArcelorMittal's Rs 42,000 crore bid of the bankrupt company, alleging that its promoter Lakshmi Mittal hid his association with loan defaulting firms run by his brothers that made ArcelorMittal ineligible to participate in insolvency proceedings.

The plea by Essar Steel Asia Holdings Ltd (ESAHL), which holds 72 per cent shares of Essar Steel, comes weeks after an insolvency court cleared ArcelorMittal's bid for Essar Steel, which was auctioned by lenders to recover unpaid loans.