The Ahmedabad bench of National Company Law Tribunal (NCLT) on Friday cleared
ArcelorMittal's Rs 42,000 crore resolution plan for Essar Steel, 583 days after it was admitted into the tribunal for insolvency proceedings, instead of the mandated 270 days.
The court, while delivering the verdict, said that it cannot impose judicial view over banks' wisdom. However, it asked the Committee of Creditors (CoC) to reconsider distribution of dues, suggesting that lenders give 15 percent of the total corpus to the operational creditors of Essar Steel.
The current offer from ArcelorMittal entails a haircut of about 14 percent for the financial creditors of Essar Steel. The steelmaker was admitted into the NCLT in August of 2017, and is one of the twelve largest defaulters identified by the Reserve Bank of India (RBI) to be sent to bankruptcy court. It has a debt of over Rs 49,000 crore to SBI-led consortium.
In a reply to the verdict, Essar Steel said the settlement proposal of Rs 54,389 crore by the company is the most compelling one available to the creditors and fulfills the Insolvency and Bankruptcy Code (IBC) declared overriding objective of value maximisation, which has been established time and again by courts at all levels.
"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 the creditors," Essar Steel said.
ArcelorMittal, which is set to foray into India with this acquisition, if there are no further hurdles, said, “We welcome today’s pronouncement by the NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible.”
Last month, the National Company Law Appellate Tribunal (NCLAT) had directed the NCLT Ahmedabad to take a decision by March 8 on the bid submitted by ArcelorMittal for the acquisition of Essar Steel.
Last October, a committee of Essar Steel creditors had picked ArcelorMittal and Nippon Steel joint venture to acquire the 10-million tonne steel mill for over Rs 42,000 crore. But the original promoters, the Ruias made a counter bid with Rs 54,384 crore offer later and was rejected by the lenders and the resolution professional.
ArcelorMittal's resolution proposal also includes an additional Rs 8,000-crore of capital injection into the company to improve operational efficiencies, increase production and deliver enhanced levels of profitability.
Essar Steel's operational creditors with large dues include the national oil marketer IndianOil with over Rs 3,500 crore of dues.
The promoters of
Essar Steel made several attempts to wrestle back control of the company, first by trying to participate in the bidding itself and then by offering to withdraw the company from insolvency proceedings by clearing dues of all financial and operational creditors.
However, the provisions of IBC had prevented them from succeeding. Section 29A of the IBC, which bars promoters of a defaulting company from bidding in the insolvency process meant the Ruias were not allowed to place a bid for the company.
Essar Steel runs a 10-million-tonne steel mill at Hazira in Gujarat and owes over Rs 49,000 crore to over two dozen banks led by the SBI and has been under the bankruptcy proceedings since June 2017.
With inputs from PTI.