ArcelorMittal on Friday won a crucial round in its highstakes battle to wrest control of Essar Steel after the Ahmedabad bench of the bankruptcy court approved the lenders’ plan to award the firm to the global steel giant. But the legal wrangling over the bankrupt steel firm may not be over yet, with the promoter Ruia family and British bank Standard Chartered seeking permission to appeal against the order. The National Company Law Tribunal okayed the resolution professional’s (RP’s) plan, approved by the bankrupt firm’s lenders, with a slight amendment that could throw in a bit more for operational creditors. The court suggested that the payment of Rs 42,000 crore by Arcelor-Mittal be distributed among financial and operational creditors in the ratio of 85:15. The earlier proposal envisaged just about a few hundred crores for operational creditors whose claims are below Rs 1 crore.
“It’s of our concern that the dues of operational creditors should be considered,” said Harihar Prakash Chaturvedi, judicial member at NCLT-Ahmedabad. As per the current plan, about 92% of the payment by ArcelorMittal will go to financial creditors. The total claim of operational creditors amounts to nearly Rs 4,700 crore. If the court-suggested ratio is implemented, operational creditors would get nearly Rs 4,600 crore while financial creditors wouldn’t have to take a big hit. “However, it’s just a suggestion. It’s upon the CoC (Committee of Creditors) to consider this suggestion,” said Chaturvedi. The order came after a bunch of operational creditors, Standard Chartered and the Ruias challenged the RP’s proposal, which had approved ArcelorMittal’s resolution plan. The resolution plan for Essar Steel has been tied up in legal knots for almost two years with the Ruias challenging nearly every procedure associated with the bankruptcy proceedings. The steelmaker was among the first 12 cases selected by the Reserve Bank of India to be resolved under the Insolvency and Bankruptcy Code (IBC).
“We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfills the IBC’s declared overriding objective of value maximisation, which has been established time and again by courts at all levels,” said an Essar Group spokesman. “We are also confident of the legal validity of our said offer made under Section 12A, which provides for the withdrawal from the IBC process by making full payment to creditors. We will take a call on next steps after examining the same.” Even as the cases continued in various courts, including the Supreme Court, Essar Steel’s lenders went ahead with the resolution and approved ArcelorMittal’s bid, which offered to pay Rs 42,000 crore. The Supreme Court had allowed ArcelorMittal and Numetal (a consortium headed by Russia’s VTB Bank) to rebid after both cleared their dues within a fortnight of the court order. In the second round of bidding, metals giant Vedanta had thrown in its hat as a contender.
While Arcelor-Mittal cleared the dues of KSS Petron and Uttam Galva Steel (where the global steel giant was classified as promoter), the Ruias made a last-minute bid to pull Essar Steel out of insolvency proceedings by offering to pay Rs 54,000 crore to lenders. The NCLT’s Ahmedabad bench rejected the Ruias’ settlement offer in January this year. In December, multiple operational creditors, including big ones like Indian Oil Corporation, GAIL India, Dakshin Gujarat Vij and Bharat Petroleum, had approached the NCLT seeking rejection of ArcelorMittal’s proposal. On Friday, the NCLT ruled in favour of ArcelorMittal. “The main application for resolutions deserved to be allowed and the Arcelor-Mittal proposal of Rs 42,000 crore along with ?8,000 crore is approved,” judicial member Chaturvedi said. Immediately after the pronouncement of the order, lawyers of the Essar Group and Standard Chartered requested the NCLT to suspend the order so they could appeal in the National Company Law Appellate Tribunal. The NCLT judge didn’t accept the request, but said the order won’t be applicable till it is put out on Monday, thus giving time to the Essar Group and Standard Chartered to appeal.