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ArcelorMittal resolution plan for Essar Steel violates IBC: Ruia to NCLAT

Senior advocate U K Chaudhary said this was illegal and was in violation of Indian Contract Act and requested the appellate tribunal to quash the plan

Press Trust of India  |  New Delhi 

factory, steel
Representative Image of a steel factory

Prashant Ruia, the promotor of debt-ridden Essar Steel, Wednesday submitted before the Appellate Tribunal that the resolution plan moved by is in violation of the Insolvency & Bankruptcy Code.

U Chaudhary, representing Ruia, said that the proposal of India was in violation of IBC code as the proposal if approved negates the right of of the Guarantor.

"Item 18 in the adendum of the resolution plan says that right of the guarantor would stand extinguished on the approval of the resolution plan," he said.

means substitution of one person or group by another in respect of a debt. With subrogation right, a guarantor can step into the shoes of a creditor.

According to Chaudhary, this was illegal and was in violation of Indian Contract Act and requested the appellate tribunal to quash the plan.

"This is also in violation of IB Code," he said, adding that the resolution plan should either be rejected or this clause should be deleted.

Ruia was one of the personal guarantors to financial creditors, on which they gave money to the company, said

Meanwhile, Haren Raval, represeting (ESAHL) concluded his arguments.

He submitted that the CoC was aware about the ineligibility of and despite that it went ahead and voted in favour of the resolution plan submitted by it.

It has alleged ArcelorMittal LN has suppressed vital facts that would otherwise render him ineligible to offer a buyout plan for the under Section 29A of the (IBC).

Until 31 December 2018, was a shareholder of Navoday Consultants, which in turn was a shareholder in certain run by his brothers and Vinod Mittal, which had defaulted on

Mittal's association with these would make him ineligible as a bidder.

While has also moved the NCLAT claiming dues worth Rs 3.5 crore for KKS Petron.

Karur Vysya, claimed to be a financial creditor of KKS Petron, in which, paid around Rs 4,000 crore to clear dues to be eligible to bid for EssarSteel.

The appellate tribunal would continue its hearing tomorrow.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Wed, May 15 2019. 22:41 IST