Essar Steel’s Ex-Promoters move to Tribunal against NCLT’s Decision in Favour of Arcelor Mittal

In a recent update on Essar Steel’s insolvency case, after the Ahmedabad bench of NCLT (National Company Law Tribunal) announced its decision in favour of Arcelor Mittal last week, the three directors of board of Essar Steel on Monday approached the National Company Law Appellate Tribunal (NCLAT) against this decision of NCLT.

These three directors of Essar Steel are - Prashant Ruia, Dilip Oommen, and Rajiv Bhatnagar. Along with these directors, the company’s one of the lenders, Standard Chartered Bank has also approached the appellate tribunal against the NCLT’s order.

Last week on Friday, the Ahmedabad bench of NCLT had finally announced its order in the long-drawn Essar Steel insolvency case in favour of Arcelor Mittal and with this, Arcelor Mittal moved closer to its plans to enter Indian steel circuit which it had been trying to do over a decade.

ArcelorMittal, in a joint venture with Japan’s Nippon Steel & Sumitomo Metal Corp., has offered an upfront cash settlement of INR 42,000 crore to lenders and INR 8,000 crore capital infusion. ArcelorMittal is also planning INR 18,697 crore capital expenditure programme for the asset till 2024, according to its 2018 annual report.

In its order, the NCLT, however, asked ArcelorMittal to offer 15% of the upfront cash settlement of INR 42,000 crore, or INR 6,300 crore, to operational creditors. The original resolution plan only offered INR 196 crore to operational creditors against claims of INR 4,976 crore. The NCLT order means financial creditors—the banks—will have to take a deeper haircut on the asset.

The approval from NCLT came after the National Company Law Appellate Tribunal (NCLAT) on 28 February directed NCLT Ahmedabad to take a decision on ArcelorMittal’s offer for Essar Steel plan by 8 March.

On 29 Jan’19, NCLT Ahmedabad had rejected a full debt settlement proposal of INR 54,389 crore from the original promoters of Essar Steel. The tribunal ruled that the offer violates Section 12A of the Insolvency and Bankruptcy Code (IBC), which says the promoters can retrieve a company from bankruptcy proceedings by paying full settlement but not after other parties have submitted their expressions of interest. Now as these promoters have approached the higher tribunal, it remains to be seen what decision will NCLAT take in the coming days.

source: SteelMint