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SC orders status quo on funds payout in Essar Steel insolvency case

ArcelorMittal's entry in to India could be delayed; SC asks NCLAT to expedite hearing in the issue

Aashish Aryan  |  New Delhi 

The court has asked the NCLAT to expedite hearing in the matter

ArcelorMittal’s entry into India’s steel market could be delayed further after the Supreme Court on Friday ordered the status quo on the distribution of funds among operational and financial creditors from the Luxembourg-based firm’s Rs 42,000-crore resolution plan for India. The apex court also asked the (NCLAT) to expedite hearing in the matter.

A two-judge Bench, led by Justice Rohinton F Nariman, was hearing a bunch of petitions moved by the committee of creditors (CoC) of debt-laden The CoC challenged a direction of the NCLAT asking the resolution professional (RP) to call a fresh meeting of the committee to consider the redistribution of funds among the creditors.

During the last hearing on Tuesday, a two-member Bench of the NCLAT, headed by Chairperson Justice S J Mukhopadhaya, had said it could ask to deposit the bid amount of Rs 42,000 crore in a separate bank account or with the Ahmedabad Bench of the National Company Law Tribunal (NCLT) or the appellate tribunal itself.

This amount would have to be deposited by on April 23, when it would next hear the case, the appellate tribunal had said. The NCLAT had then said it was not setting aside ArcelorMittal’s resolution plan approved by the Ahmedabad Bench of the NCLT but would look into the issue of redistribution of funds if it found the CoC had treated financial and other creditors in a discriminatory manner.

The observation came after the CoC informed that the lenders, led by State Bank of India (SBI), had decided against a higher payout to Standard Chartered Plc. StanChart had moved the NCLAT, alleging that the CoC had discriminated against it, as it was being offered only 1.7 per cent of its 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.

ALSO READ: Essar Steel clocks in highest ever production at 6.8 million tonnes

ArcelorMittal’s Rs 42,000 crore resolution plan for was approved by the NCLT on March 8. In its judgment, the NCLT had observed that though it did not want to change the resolution plan approved by the CoC, it would the lender to reconsider distribution of dues and give 15 per cent of the total offer to operational creditors.

The Lakshmi Mittal-led company has been fighting for the control of Essar Steel for well over 600 days now. The case has seen many twists and turns, including a settlement plan of Rs 54,389 crore made by the promoters of Essar Steel, who offered to pay off the entire debt. The plan was, however, rejected by the NCLT.

ArcelorMittal’s bid, on the other hand, includes an upfront payment of Rs 42,000 crore towards the debt resolution of Essar Steel, with an additional Rs 8,000 crore of capital infusion into the company to support operational improvement, increase production levels, and deliver enhanced levels of profitability. In October 2018, the CoC of Essar Steel had voted to approve ArcelorMittal’s plan and a letter of intent was issued.

ALSO READ: NCLAT can't force us to change approved resolution plan: Essar Steel CoC

Earlier, the Ahmedabad bench of NCLT had sent the first round of bids for Essar Steel back to the RP and the CoC for reconsideration, after it was found that both and the then bidder Numetal had not been given time to “cure” their ineligibility. The RP had disqualified both ArcelorMittal and Numetal in the first round. While ArcelorMittal was disqualified as it had not cleared the debt of related company Uttam Galva prior to submission of the bid, Numetal was disqualified owing to Rewant Ruia’s exposure in the company. Rewant is the son of Ravi Ruia, who is a promoter of Essar.

First Published: Fri, April 12 2019. 18:11 IST