Signage for Essar Steel Ltd. is displayed as workers load items onto a truck at the company’s Pune facility. (Photographer: Dhiraj Singh/Bloomberg)

Essar Steel Insolvency Case: NCLAT Asks NCLT To Expedite Decision

The National Company Law Appellate Tribunal on Thursday asked the Ahmedabad bench of the National Company Law Tribunal to expeditiously decide on the Essar Steel insolvency case, where ArcelorMittal emerged as the highest bidder.

Essar Steel lenders led by the State Bank of India had filed an application with the tribunal seeking early approval of the resolution plan. The case has been running for about 500 days as against a maximum of 270 days allowed for a resolution under the Insolvency and Bankruptcy Code.

A two-member bench, headed by the tribunal’s Chairman Justice SJ Mukhopadhaya, asked the NCLT bench to take an early decision in the matter as per the order passed by the Supreme Court in this regard.

"We hope and trust that the adjudicating authority (NCLT) would pass the final order, one or the other way, keeping in view the decision of the Supreme Court. In case the adjudicating authority do not pass any order in accordance with law by an early date, it would be open to appellants to re-agitate the matter," the appellate tribunal said.

The Committee of Essar Steel Creditors had on Oct. 25 last year voted for accepting ArcelorMittal's offer of upfront payment of Rs 42,000 crore to the lenders and an additional Rs 8,000 crore towards capital expenditure.

Also read: IBC: Ruias Offer To Repay Over Rs 54,000 Crore To Withdraw Essar Steel From Insolvency

A group of operational creditors and Essar Steel shareholders have challenged the committee’s decision. While operational creditors say ArcelorMittal offer does not include clearing all of their dues, Essar Steel shareholders want them to pay Rs 54,389 crore to clear all outstanding dues, including of operational and financial creditors, be considered.

Senior advocate Gopal Subramanium appearing for the committee, said that NCLT had adjourned the matter twice without giving any reason. He also submitted that shareholders of the corporate debtors (Essar Steel) have also approached the NCLT, who has no "locus standi" in this matter before the Ahmedabad bench and are delaying the matter.

According to Subramanium, it has become almost 500 days, when the insolvency petition was admitted by the NCLT against Essar Steel on Aug. 2, 2017. The matter is listed at NCLT Ahmedabad on Jan. 7 for next hearing.

The Supreme Court in its order passed in this matter on Oct. 4, 2018 asking both resolution applicants—Russia's VTB bank backed Numetal and ArcelorMittal—to clear their defaults of their related corporate debtor to be eligible for bidding.

The apex court had also said that the 270-day window for closing a resolution plan as mandated by the Insolvency and Bankruptcy Code would exclude any litigation in the tribunal or the Supreme Court.

The committee has selected the Rs 50,000 crore bid from global steel giant ArcelorMittal and is now before the NCLT, which is the designated authority under the IBC code, for approval.

Essar Steel, which runs a 10-million-tonne steel mill in Gujarat, owes over Rs 49,000 crore to over two dozen banks led by the SBI and has been under the bankruptcy proceedings since last June. As per ArcelorMittal's resolution plan, Rs 42,000 crore will be paid to the secured lenders, while an additional Rs 8,000 crore will be pumped in as working capital.

Also read: Essar Steel Insolvency: Ruias Surprised At Lenders Spurning Their Proposal   

The NCLT is also hearing petitions filed by close to 30 operational creditors of Essar Steel, seeking settlement of their dues from ArcelorMittal. These operational creditors have moved the NCLT against the resolution plan offered by the world's largest alloy maker ArcelorMittal as it denies those operational creditors with over Rs 1 crore dues any settlement.