NCLAT reserves verdict in appeals against approval of ArcelorMittal’s plan for Essar Steel

NCLAT reserves verdict in appeals against approval of ArcelorMittal’s plan for Essar Steel

Aditi Singh

The National Company Law Appellate Tribunal has today reserved its verdict in a batch of appeals moved against the approval of ArcelorMittal’s resolution plan for Essar Steel.

During the course of the hearings, a two-member Bench headed by Chairperson Justice SJ Mukhopadhyay and Justice Bansi Lal Bhat has hinted that it would restrict its scrutiny to the distribution of the money promised in the plan.

Justice SJ Mukhopadhyay and Justice Bansi Lal Bhat
Justice SJ Mukhopadhyay and Justice Bansi Lal Bhat

The Appellants before the Appellate Tribunal included 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. After the National Company Law Tribunal Ahmedabad Bench approved ArcelorMittal’s Rs 42,000 crore plan for Essar Steel on March 8,  quick appeals against the orders were preferred.

Read Also: NCLAT gives conditional nod to ArcelorMittal‘s resolution plan for Essar Steel

Standard Chartered Bank, which is one of the financial creditors of Essar Steel, has challenged ArcelorMittal’s resolution plan on the ground that the approval process adopted by the Committee of Creditors was illegal and discriminatory. It has contended that the Committee of Creditors led by the State Bank of India formed a ‘core committee’ which did not consult it while approving the resolution plan.

As a result, as opposed to other financial creditors of Essar getting as much as 92% of their claim, Standard Chartered was merely offered 1.7% of its claim amount. Standard Chartered has also alleged that ArcelorMittal has reduced its proposal of an upfront payment of Rs 42,000 crore to Rs 39,500 crore.

The erstwhile directors have 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. 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 who are NPAs. The Appellant Operational Creditors (OCs) in the matter have admitted claims of over Rs 260 crore and have received zero amount in the resolution plan. Aggrieved by the plan, an equitable recovery in the ratio of 85:15 between the Financial Creditors and Operational Creditors is being sought.

Interestingly, the OCs have claimed that Essar Steel’s EBIDTA since the admission of the insolvency proceedings, which is to the tune of Rs. 4,229 crores, could also be mis- utilized for satisfying the claim of the FCs, without apportioning it towards the admitted claims of OCs. ArcelorMittal, on the other hand, has maintained that it has no interest as such in how the upfront amount promised by it was being distributed among the creditors.

CoC has 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 and Senior Advocate Harish Salve appeared for ArcelorMittal.  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, appearing for Essar Steel Asia Holdings.

Bar and Bench - Indian Legal news