Essar Steel case: NCLAT refuses stay on NCLT nod to ArcelorMittal plan

The National Company Law Appellate Tribunal (NCLAT) on Friday refused to issue a bankruptcy court order approving steel giant ArcelorMittal’s 42,000-crore takeover bid for Essar Steel and wanted a fresh plan for the distribution of bid amount between financial and operational creditors of the debt-laden firm.

Essar Steel directors had challenged the Ahmedabad Bench of the National Company Law Tribunal’s (NCLT) nod to global steel giant ArcelorMittal SA’s bid for the company on the plea that their own offer of 54,389 crore was superior. This would help clear 100 per cent outstanding of both financial and operational creditors.

Standard Chartered also moved the NCLAT opposing the plan as its counsel contended that the bank was being given only 1.7 per cent of its total dues from Essar Steel, Other financial creditors, forming part of the committee of creditors (CoC), were getting over 85 per cent of their dues.

A two-member Bench headed by Justice SJ Mukhopadhaya refused to stay the NCLT nod to ArcelorMittal’s resolution plan and posted the matter for March 18.

It also asked the SBI-led CoC to bring a fresh distribution plan at the next date of hearing, saying there should not be any discrimination and that all were equal.

Without the recovery for secured lenders, the CoC wouldn’t have approved the plan, the counsel appearing for the committee added that it is not a lottery system for operational creditors.

Financial creditors would be left with Rs 37,800 crore if 10 per cent is given to operational creditors.

On Thursday, the appellate tribunal had told Essar Steel Asia Holdings (ESAH) that its Rs 54,389-crore resolution plan would only be considered only if the entity cleared the Essar’s entire bad debt.

The NCLAT suggested that all operational creditors below 1 crore be given 100 per cent of their dues, as should the employees of Essar Steel. Only 90 per cent of 42,000 crore must be given to financial creditors.

ArcelorMittal’s resolution proposal involves financial creditors getting 41,987 crore out of their total dues of 49,395 crore. Operational creditors, under the plan, would get just 214 crore against the outstanding of 4,976 crore.

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