Luxembourg-based ArcelorMittal’s entry into India could be further delayed after the Supreme Court on Friday ordered status quo of as today to be maintained with respect to the distribution of funds among operational and financial creditors of its Rs 42,000-crore resolution plan for Essar Steel India Ltd. The top court also asked the National Company Law Appellate Tribunal (NCLAT) to expedite hearing in the issue.
A two judge Bench led by Justice Rohinton F Nariman was hearing bunch of petitions moved by the Committee of Creditors (CoC) of debt laden Essar Steel who had approached the top court against an direction of the NCLAT asking the Resolution Professional (RP) of the company to call a fresh meeting of the CoC to consider the issue of redistribution of funds among the financial and operational creditors.
During the last hearing on Tuesday, a two member bench of the appellate tribunal headed by Chairperson Justice S J Mukhopadhaya had said it could ask ArcelorMittal to deposit the bid amount of Rs 42,000 crore in a separate bank account or with the Ahmedabad Bench of the NCLT or the appellate tribunal itself. This amount would have to be deposited by ArcelorMittal on April 23, when it would next hear the case, the appellate tribunal had then said. The NCLAT had then said that though they were not setting aside ArcelorMittal’s resolution plan approved by the Ahmedabad bench of National Company Law Tribunal (NCLT), they would look into the issue of redistribution of funds from ArcelorMittal’s plan if they found that the Committee of Creditors (CoC) of Essar Steel 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 pay out 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 total 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.
ArcelorMittal’s Rs 42,000 crore resolution plan for Essar Steel was approved by the Ahmedabad bench of NCLT on March 8. In its judgment, the NCLT had also 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 control of Essar Steel for well over 600 days now. The case has seen many twists and turns including a settlement offer 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 NCLT Ahmedabad.
ArcelorMittal's bid, on the other hand, includes an up-front 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.
Earlier, the Ahmedabad bench of NCLT had sent the first round of bids for Essar Steel back to the Resolution Professional (RP) and CoC for reconsideration, after it was found that both ArcelorMittal 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 till then cleared the debts of its related company Uttam Galva prior to the submission of bid, Numetal was disqualified owing to Rewant Ruia’s exposure in the company. Rewant is the son Ravi Ruia, who is a promoter of Essar.