An operational creditor of Essar Steel Tuesday filed an interlocutory application in the National Company Law Tribunal pleading that the debt settlement proposal made by shareholders of Essar Steel be considered as it would pay off all outstanding of both financial and operational creditors.
Orissa Stevedores Ltd, which has Rs 204.6 million in outstanding dues from Essar Steel, sought a direction to Committee of Essar Steel Creditors "not to take any further action for implementation" the takeover bid made by ArcelorMittal till the settlement proposal is considered.
"The present application is filed taking into consideration that the Committee of Creditors (CoC) which consists of financial creditors has not considered the financial recovery of the operational creditors of Essar Steel while considering the settlement proposal and also while considering the Resolution Plan submitted by ArcelorMittal India Ltd," the petition filed in NCLT here said.
Last month, the CoC picked NRI billionaire Lakshmi Mittal-led ArcelorMittal's Rs 420 billion bid for takeover of Essar Steel. This after it ignored the Settlement Proposal of Essar Steel Asia Holding Ltd (ESAHL) -- the promoter of Essar Steel -- to pay Rs 543.89 billion to all clear all dues of the financial and operational creditor in a last-ditch effort to avert losing their flagship company.
In the petition, Orissa Stevedores said ArcelorMittal's Resolution Proposal involves financial creditors getting Rs 419.87 billion out of their total dues of Rs 493.95 billion. Operational creditors, under the plan, would get just Rs 2.14 billion against the outstanding of Rs 49.76 billion.
In the settlement plan made by ESAHL, all the Rs 543.89 billion dues of financial and operational creditors will be settled, it said.
"A bare perusal of (the two proposals) substantiates beyond doubt that the operational creditors are proposed to receive a higher financial recovery if the settlement proposal of Essar Steel shareholders is considered instead of the Resolution Plan of ArcelorMittal," it said.
The company said it has received an email from ESAHL offering to pay 25 per cent of the outstanding amount in upfront payment and remaining in three equal installments over three years.
"Clearly, it is beyond doubt that the operational creditors who have had no participation or role in the CoC have been neglected and overlooked in the entire process," the petition said. "To the utter shock and dismay, the financial creditors who are also receiving a higher financial recovery are not even considering the settlement proposal."
It pleaded that the action of CoC is contradictory to the objects of the Insolvency and Bankruptcy Code which "envisages resolution for maximising the value of the assets of the firm to promote entrepreneurship, and availability of credit, and balance of interests of all the stakeholders".
"Considering these objects of the Code, the reluctance on the part of the CoC defeats the very aforesaid objectives," it said.