With arguments for and against maintainability of Essar Steel Asia Holding Ltd (ESAHL)'s concluding, the National Company Law Tribunal (NCLT) Ahmedabad bench is set to pronounce order on the same by January 31, 2019.
Senior legal counsels from ESAHL, Committee of Creditors (CoC), Resolution Professional (RP) and ArcelorMittal made a last ditch effort to present their cases. While Essar Steel's holding company has been asserting its right to redeem the insolvent steel maker for consideration of its Rs 54389 crore worth settlement offer, the rest have argued that the offer was non-maintainable on multiple grounds.
On Monday, after hearing the arguments, the two-member bench comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari said that the order on maintainability of ESAHL's offer would be made on or before January 31, after which related hearing based on the pronouncement would begin. The tribunal has also invited any interested entities seeking to be a party to the case by January 31, 2019.
The conclusion of hearing on maintainability of ESAHL's offer comes in the wake of the National Company Law Appellate Tribunal (NCLAT) last week directing NCLT Ahmedabad bench to expedite the hearing process on Essar Steel insolvency case in order to arrive at a decision quickly. As against the maximum stipulated time of 270 days for resolution of cases under the Insolvency and Bankruptcy Code (IBC), the Essar Steel insolvency case has been running for around 500 days now. The matter has now been listed for next hearing at NCLT Ahmedabad on January 7, 2019.
Representing ArcelorMittal, both Niraj Kaushal and Abhishek Manu Singhvi, argued that ESAHL's claims of right to redeem itself as a shareholder of Essar Steel under the Transfer of Property Act did not hold water. "IBC Act is a new and special Act, while Transfer of Property Act is a 100-year-old and not so special Act. The new and special Act would always over-rule the other. There is no right to redemption under IBC Act as sought by Essar Steel Asia Holdings. ESAHL is trying to ambush the process which is the worst kind of abuse of process," Singhvi told the bench.
Kaushal, on the other hand, argued that the Supreme Court order in October invoked Section 142 of IBC under special circumstances and for limited number of parties, of which ESAHL was not part of. On October 4, SC had ordered ArcelorMittal and Numetal to pay their dues and resubmit resolution plans and directed NCLT to consider them, ruling that in case of ineligibility the assets shall go into liquidation.
"Essar has also not cleared related party corporate debt, which in case of Numetal was Rs 80000 crore. As per IBC Act only resolution professional has right to submit the proposal. By approaching NCLT, Essar is trying to subvert the entire process. Their strategy appears to wear out the bidder who has cleared Rs 8000 crore in debt and Committee of creditors who are losing Rs 17 crore every day," Kaushal argued.
Apparently, on Monday, Essar Global Fund, the holding company of the Essar Group of companies, announced repayment of its last debt tranche of Rs 12,000 crore (US$1.75 billion) to its various Indian and foreign lenders, thereby completing the total debt repayment of Rs 42,000 crore, spread over two years. Besides, it has also made provision for Rs 45,000 crore of group debt relating to the insolvent Essar Steel India which is currently going through IBC process.
ESAHL has made the debt settlement proposal of Rs 54389 crore on the day that lenders voted in favour of ArcelorMittal’s Rs 42000 crore offer. Under ArcelorMittal’s Rs 42000 crore plan, financial creditors stand to gain Rs 41987 crore out of the total dues of over Rs 494 crore, while operational creditors will get Rs 214 crore against their outstanding dues worth Rs 4976 crore.
ESAHL's senior counsel Mihir Joshi prayed to the bench to consider the CoC's efforts to refuse a higher amount offered by the former in favour ArcelorMittal's lesser amount under the IBC process which eventually looks to maximise revenue and revival of the insolvent company, and not merely sale of assets.
Challenging ArcelorMittal's claims of non-maintainability of ESAHL's offer, Joshi stated that the CoC, which ultimately approves the resolution plan, did not plead against or denied ESAHL's right to redemption. "CoC has never denied my right to redemption, whether it concludes is for tribunal to decide. ArcelorMittal's objections are of little relevance as they have gone ahead and argued without establishing their locus in the case," said Joshi.
Countering ArcelorMittal's claims of ESAHL's right to redeem being an afterthought after SC order in October, Joshi maintained that it had made the right to redemption plea much earlier in July 2018.
On October 25, ArcelorMittal's resolution plan of Rs 42000 crore was approved by 92 per cent of CoC. However, on the same day, ESAHL had made the debt settlement proposal of over Rs 54000 crore and had even challenged CoC's approval of ArcelorMittal's resolution plan, along with some operational creditors filing interlocutory applications against CoC's vote.