NEW DELHI: ArcelorMittal moved a step closer to acquiring Essar Steel with the National Company Law Appellate Tribunal (NCLAT) allowing the implementation of its Rs 42,000 crore resolution plan for the debt-laden steel company, pending its final ruling.
It asked ArcelorMittal to deposit Rs 42,000 crore with the committee of creditors (CoC), which may disburse funds but the distribution will be subject to the tribunal’s ultimate decision.
“We are not going to interfere with the resolution plan. We have not passed a stay order,” said the two-member bench led by justice SJ Mukhopahdyaya on Monday. “We are looking into the question of apportionment to creditors.”
This means that ArcelorMittal’s resolution plan approved by the Ahmedabad bench of the National Company Law Tribunal (NCLT) can proceed.
The lenders of Essar Steel are likely to soon receive payments toward their dues in accordance with the plan but subject to any changes in case NCLAT modifies the distribution of funds under the proposal.
Essar Steel Asia Holdings (ESAH) had appealed against the NCLT’s rejection of its Rs 54,389 crore resolution plan.
ESSAR UNLIKELY TO CHALLENGE DECISION
On Friday, NCLAT had asked ESAH to withdraw its resolution plan.
“The resolution professional will be the chairperson of the monitoring committee and will act in accordance with law to ensure that the company is a going concern,” the tribunal said.
Essar is not likely to appeal against the decision in the Supreme Court, said people with knowledge of the matter.
Essar Steel was one of the 12 large accounts referred for insolvency resolution by the Reserve Bank of India in June 2017, but the case has dragged on because of repeated legal challenges to nearly 600 days against the mandated 270-day period.
NCLAT will look into the issue of distribution of the funds among financial and operational creditors and asked the Insolvency and Bankruptcy Board of India (IBBI) to submit details of money paid out to financial and operational creditors in other successful insolvency resolution applications thus far. The tribunal may use these figures to arrive at an appropriate final distribution of funds to creditors.
Under the ArcelorMittal resolution plan, financial creditors will get Rs 41,987 crore out of their total dues of Rs 49,395 crore leaving operational creditors with just Rs 214 crore against claims of Rs 4,976 crore.
Standard Chartered Bank, which has appealed against the resolution plan on the grounds of unfair distribution, will only get Rs 60.7 crore against its claims of Rs 3,487 crore as things stand. The bench said Standard Chartered will be treated on par with other financial creditors if it is found that the lender had a legitimate claim. Standard Chartered holds a Rs 3,487 crore corporate guarantee issued by Essar Steel for a loan to Essar Steel Offshore.
Counsel for Standard Chartered said that the disbursement of funds to creditors would lead to “further complications” as the appeal was still being heard. The bench replied that the implementation would be subject to the tribunal’s decision on the appeal.
NCLAT had earlier asked the committee of creditors of Essar Steel to consider utilising 10% of the Rs 42,000 crore upfront payment by ArcelorMittal to pay operational creditors with dues over Rs 1 crore.
ArcelorMittal has already agreed to pay Rs 196 crore to fully repay all operational creditors of Essar Steel with dues of up to Rs 1crore and Rs 18 crore to pay salaries and workmen’s dues, over and above their Rs 42,000 crore resolution plan. It will also make an equity infusion of an additional Rs 8,000 crore in Essar Steel.