NCLAT Says Essar Steel Lenders Cannot Discriminate Among Operational Creditors
The National Company Law Appellate Tribunal on Tuesday observed that the Committee of Creditors of Essar Steel cannot discriminate between operational creditors of the debt-ridden firm.
The lenders of Essar Steel divided operational creditors of the company into two types—one with claims under Rs 1 crore, and another over Rs 1 crore.
During the proceedings, the NCLAT bench headed by Chairman Justice SJ Mukhopadhaya said that the operational creditors cannot not be treated differentially.
“We have said that you cannot discriminate among the same set of creditors. You can not discriminate among operational creditors on the basis of their dues,” the NCLAT said.
According to the resolution plan of ArcelorMittal approved by committee of creditors on Oct. 24, 2018, operational creditors having claims below Rs 1 crore will get their dues and those with claims of over Rs 1 crore will receive almost zero.
Financial creditors would get an upfront Rs 41,987 crore payment against their admitted claims of Rs 49,395 crore while operational creditors are getting Rs 214 crore against their dues of Rs 4,976 crore.
Later, the committee of creditors decided to allocate an additional Rs 1,000 crore to operational creditors after the National Company Law Tribunal and the NCLAT suggested it to rework on the distribution of funds.
According to advocate Anand Verma, who is representing operational creditors, the banks, which are financial creditors, are getting almost 90-92 percent of their dues.
“Moreover, the offer of additional Rs 1,000 crore given to the additional creditors has no meaning in law, as it requires equal treatment to financial and operational creditors,” he said.
However, senior advocate Gopal Subramanium, representing the committee said that the Supreme Court in a judgement has said that financial creditors and operational creditors could not be treated at par.
The NCLAT would continue the hearing in the matter Wednesday.
According to a notice published earlier, the total dues of operational creditors with below Rs 1 crore claim is only around Rs 200 crore and the dues of operational creditors with above Rs 1 crore claim stood at Rs 4,900 crore.
Last week, the Supreme Court stayed the payment of money by ArcelorMittal to lenders to buy Essar Steel over a petition filed by various stakeholders.