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Essar Steel sale on hold

Essar CoC wants NCLAT order to be quashed

By TT Bureau in Calcutta
  • Published 23.07.19, 1:18 AM
  • Updated 23.07.19, 1:18 AM
  • a min read
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An Essar Steel plant (Source: Essar)

The Supreme Court has agreed to settle the issue of the distribution of funds flowing out of an insolvency resolution process among the various classes of creditors “once and for all”.

The apex court made the observation while hearing the appeal of the committee of creditors of Essar Steel, which challenged the judgment of the National Company Law Appellate Tribunal (NCLAT). The SC put the sale of Essar Steel to ArcelorMittal on hold and agreed to hear the matter on August 7.

A bench of Justices R. F. Nariman and Surya Kant said the monitoring committee will continue its work till the case is heard. “Once the committee of creditors (CoC) in their concerned wisdom had decided on the division of assets, there should have been no re-distribution, like you are an interim resolution professional (IRP). We would settle this issue once and for all,” the bench observed at the outset.

The bench was hearing a plea by the CoC of Essar Steel, challenging NCLAT’s July 4 order, which approved steel tycoon L.N. Mittal-led ArcelorMittal’s Rs 42,000 crore bid for acquiring the debt-laden firm. The CoC has sought the quashing of the NCLAT order which had given financial creditors equal status with operational creditors in the distribution of the ArcelorMittal’s bid amount.

Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 crore of unpaid dues.

In its July 4 order, the NCLAT had said that financial creditors will get 60.7 per cent of their admitted claims of Rs 49,473 crore, almost the same as operational creditors.

The operational creditors with admitted claim amount of less than Rs 1 crore would get 100 per cent, while those with above Rs 1-crore claim would get 60.26 per cent and workmen and employees would get 100 per cent.

The tribunal had said that the CoC will have no role in the distribution of Rs 42,000 crore and allowed the claims of the operational creditors such as Indian Oil, GAIL, ONGC, and the NTPC.

ArcelorMittal had told the NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring Essar Steel under the insolvency process.