NCLAT rejects Ruia's bid to block ArcelorMittal; approves bid for Essar Steel with modification

The NCLAT Thursday approved steel tycoon Lakshmi Mittal-led ArcelorMittal's Rs 42,000 crore bid for the acquisition of Essar Steel after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.

The National Company Law Appellate Tribunal (NCLAT), however, gave operational creditors equal status as lenders in the distribution of the ArcelorMittal's bid amount among the creditors of Essar Steel.

Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.

The NCLAT said financial creditors will get 60.7 per cent of their admitted claims of Rs 49,473 crore. The rest would go to operational creditors.

The Committee of Essar Steel Creditors (CoC) will have no role in the distribution of the Rs 42,000 crore, it ruled while allowing claims of operational creditors such as Dakshin Gujarat, Gujarat Energy, Bharat Petroleum, Indian Oil, GAIL, ONGC, and NTPC.

ArcelorMittal had told NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring debt-laden Essar Steel under the insolvency process.

On the issue of eligibility of ArcelorMittal, NCLAT said the Supreme Court had already settled the issue and the same "cannot be re-agitated again and again."
"Any such attempt is clearly barred by the principles of res judicata," it said. "Therefore, the Application preferred by the Appellant- Mr. Prashant Ruia and Intervenor - 'Essar Steel Asia Holdings Limited' deserves to be rejected."
While financial creditors may choose to appeal against the ruling in the Supreme Court, an Essar Steel spokesperson said, "It appears that new facts regarding ineligibility under Section 29A which emerged only after the previous judgement of the Supreme Court, have not been given due consideration. We are awaiting the detailed order and decide our course of action thereafter."
A spokesperson for ArcelorMittal said: "We note today's ruling by the NCLAT. We need to review the full written order to understand any implications on completion of the transaction."