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The National Company Law Appellate Tribunal (NCLAT) today approved ArcelorMittal’s resolution plan for Essar Steel.
The Appellant Tribunal has, however, modified the distribution of Rs 42,000 crore promised in the resolution plan amongst Essar Steel’s financial and operational creditors.
Holding that there could be no classes of financial creditors on the basis of being secured and unsecured, the NCLAT directed that all financial creditors having a claim amount of over Rs 1 crore would be entitled to 60.7% of their admitted claim.
Similarly, it awarded around 60% of the admitted claim to certain operational creditors having claims of more than Rs 1 crore.
The NCLAT also stated that the profits of Essar Steel, if any, during the pendency of the insolvency, would also be distributed among the creditors on a pro rata basis.
The Appellate Tribunal also accepted additional claims by ONGC and NTPC, thus taking the total claim to almost Rs 69,193 crore.
The judgment was passed by a two-member Bench headed by Chairperson Justice SJ Mukhopadhyay and Justice Bansi Lal Bhat in a batch of appeals by Standard Chartered Bank; erstwhile Directors of Essar Steel Prashant Ruia, Dilip Oommen, and Rajiv Bhatnagar; and stakeholder Essar Steel Asia Holding; as well as several operational creditors.
The appellants had moved the NCLAT against the March 8 order of the National Company Law Tribunal Ahmedabad Bench approving ArcelorMittal’s Rs 42,000 crore plan for Essar Steel.
Standard Chartered Bank, which is one of the financial creditors of Essar Steel, had challenged ArcelorMittal’s resolution plan on the ground that the approval process adopted by the Committee of Creditors was illegal and discriminatory. As per the resolution Ppan, Standard Chartered was offered merely offered 1.7% of its claim amount as opposed to other financial creditors of Essar, which got as much as 92% of their claim.
The erstwhile directors assailed the process adopted by the CoC while approving ArcelorMittal’s resolution plan, claiming that they did not get a copy of the resolution plan while it was being considered in its meetings. It also contended that ArcelorMittal was not eligible to submit a resolution plan in terms of Section 29A of IBC.
Essar Steel Asia Holdings Limited intervened in the appeals by the Directors and stated that ArcelorMittal’s resolution plan ought to be rejected as they fraudulently suppressed and misrepresented the status of its related companies, which are Non-Performing Assests (NPAs).
The appeals by the Ruias and Essar Steel Asia Holdings were dismissed by the Appellate Tribunal on the ground that issue of ArcelorMittal’s eligibility had already been settled by the Supreme Court.
The appellant operational creditors (OCs) had moved an appeal seeking “equitable recovery” after receiving nil amount in the resolution plan as against a claim amount of over Rs 260 crore.
ArcelorMittal, on the other hand, had maintained that it has no interest as such in how the upfront amount promised by it was being distributed among the creditors.
The CoC had defended the distribution of the money by stating that the same was done based on the status of the creditor.
Senior Advocate Kapil Sibal appeared for Standard Chartered, while Senior Advocate Harish Salve appeared for ArcelorMittal. The CoC was represented by Senior Advocates Ravi Kadam and GS Subramaniam.
The OCs were represented by Senior Advocate Sanjiv Sen with Advocate Anand Varma. Senior Advocate UK Chaudhary appearing for Prashant Ruia. Senior Advocate Harin P Rawal appeared for Essar Steel Asia Holdings.
Read the Judgement: