Essar Steel’s Resolution Faces Another Hurdle As Operational Creditors Move NCLT
ArcelorMittal may not get their hands on Essar Steel so easily.
Operational creditors of the insolvent firm have moved the National Company Law Tribunal saying that resolution plan accepted by the Committee of Creditors doesn't take their dues into consideration. In two separate petitions filed at the Ahmedabad bench of the NCLT, a total of 28 operational creditors have asked the tribunal for staying further resolution proceedings till their grievances are addressed.
The first petition, moved by 27 operational creditors, has asked the tribunal to direct the committee of creditors to ensure full payment to the them and take necessary steps to modify ArcelorMittal's resolution plan for that. Alternatively, it has asked the tribunal to direct the lenders to also consider the Ruia family's last-minute offer that promises to repay all creditors fully.
The second petition, filed by Orissa Stevedores Ltd. that is owed 20.46 crore, has also made a similar demand while also asking the commitee of creditors to provide a copy of ArcelorMittal’s resolution plan.
The 27 operational creditors have submitted that ArcelorMittal's resolution plan “provides no payment to operational creditors with outstanding dues of an amount more than Rs 1 crore”. They said that under the Insolvency and Bankruptcy Code operational creditors “can't be treated differentially, inequitably and unfairly as compared to the other financial creditors”.
The petition added that operational creditors are only recovering Rs 196 crore under ArcelorMittal’s plan when their total admitted claims go up to as much as Rs 4,976 crore.
It is submitted that merely because the members of the CoC are financial creditors, that cannot mean that financial creditors overlook the interest of the operational creditors who have substantial amounts.Petition Filed By 27 Operational Creditors In NCLT Ahmedabad.
Both petitions have backed the Ruias offer to pay Rs 54,389 crore—through Essar Steel Asia Holdings Ltd.—as it offers 100 percent recovery to the creditors. "It is curious that the financial creditors, who are also receiving a higher financial recovery, are not even considering the settlement proposal (by the Ruias)," the first petition said.
On Oct. 26, the committee of creditors of Essar Steel had accepted the joint offer made by ArcelorMittal and Japan’s Nippon Steel even as the Ruias made a last-ditch effort to retain the steelmaker.
ArcelorMittal’s resolution plan includes an upfront payment of Rs 42,000 crore to the lenders and a Rs 8,000-crore capital injection in Essar Steel to support operational improvement. Top lawyers had told BloombergQuint earlier that despite better recovery, the Ruias’ offer was unlikely to be accepted as it was mala fide and sought to mislead the lenders.
Essar Steel is among the first 12 non-performing assets that the Reserve Bank of India had directed banks to take to insolvency resolution in June 2017. The Ruia family-promoted company owes Rs 49,394 crore to its financial creditors and about Rs 5,000 crore to operational creditors.