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Insolvency process: Essar Steel litigation delays Uttam Galva resolution

Banks don't want to wait indefinitely for the resolution of Uttam Galva Steel Limited as the Essar Steel case is expected to be appealed before the Supreme Court by both or either of the bidders

Dev Chatterjee  |  Mumbai 

Representative Image
Representative Image

Worried over an inordinate delay in the resolution of Essar Steel’s debt, Indian lenders are taking legal opinion on how to settle the Rs 60-billion debt of (UGSL). Insolvency proceedings of is pending before the National Company Law Tribunal (NCLT) in Mumbai since December last.

The delay in resolution is because ArcelorMittal, a co-promoter till February this year, has promised to repay the debt, provided it wins the race for another bankrupt company —

ArcelorMittal was holding a 29 per cent stake in Uttam Galva Steel till February this year and was deemed ineligible by the resolution professional of to bid for as was a bank defaulter. The Code (IBC) law debars defaulters to bid for any bankrupt company in India. The Essar Steel matter is pending in the National Company Law Appellate Tribunal (NCLAT) after ArcelorMittal appealed. This case has also delayed the resolution of UGSL, say bankers.

ALSO READ: Uttam Galva IBC proceedings: NCLT awaits ruling on ArcelorMittal bid

According to a source close to the development, banks don’t want to wait indefinitely for the resolution of UGSL as the Essar Steel case is expected to be appealed before the by both or either of the bidders -- Numetal Mauritius and ArcelorMittal – if their bids are rejected by the

In March this year, did not agree to a one-time settlement application filed by promoters at 50 per cent haircut. “The possibility of an out-of-court settlement is also being discussed to with lawyers to resolve the long-pending cases,” said a banker asking not to be quoted.

Besides, in May this year, UGSL promoters said they were unaware of the reported unsolicited move by ArcelorMittal to transfer about Rs 70 billion to SBI to clear overdue loans of the company.

The NCLT, meanwhile, has admitted two of UGSL’s subsidiaries – Uttam Value Steels and — for debt resolution on June 26 and July 12, respectively.

Insolvency process: Essar Steel litigation delays Uttam Galva resolution

This was after Uttam Value Steels defaulted to Rs 32 billion of bank loans, while did not repay bank dues worth Rs 22 billion. The three Uttam Galva group have dues worth Rs 11.2 billion. Steel has said it would bid for Uttal Galva Steel’s assets.

The litigation over the 40-odd cases referred by the Reserve Bank of India in June and December last year has already delayed the debt resolution of bankrupt

Even in the cases where the bankrupt company has been taken over by a bidder, the bank’s recovery is between 20 and 35 per cent of the dues. In most cases, operational creditors and suppliers have been left in the lurch, prompting them to move courts to recover their dues.

In many cases, the resolution professionals interpreted the IBC 2016 differently, leading to a slew of litigation across NCLT benches. Of the first 12 cases identified by the for resolution of debt under the IBC, banks have approved a resolution plan fund for from But this case has also been litigated by L&T, an operational creditor, which has sought its Rs 9 billion dues from the company. The is also re-examining Tata Steel’s eligibility for acquisition of

First Published: Wed, August 08 2018. 05:33 IST