Essar Steel Case: Creditors’ Committee Treated Us Worse Than Operational Creditors, Says Standard Chartered
Standard Chartered questioned the decision of the CoC to set up a sub-committee to carry out negotiations with ArcelorMittal.
Day four of the Essar Steel insolvency hearing saw Standard Chartered continue its argument against the Committee of Creditors’ decision to treat it differently from other financial creditors of the company.
Calling the manner of distribution of claims from the winning bid of Arcelor Mittal “illegal” and “arbitrary”, Senior Advocate Kapil Sibal who was arguing for Standard Chartered said the basis of distribution adopted by the creditors’ committee was meant to benefit only select financial creditors.
The Committee of Creditors has defended its treatment of Standard Chartered on the grounds that financial creditors are entitled to their claims depending on the nature of securities they hold. On the third day of the hearing, the CoC argued that the security cover of Standard Chartered was only 0.7 percent of its total claim, which in fair value terms comes to around Rs 24 crore. Despite that, the CoC said they allotted around Rs 60 crore to Standard Chartered, much higher than the security on the credit it had extended.
Standard Chartered questioned the basis of this distinction on the grounds that the Insolvency and Bankruptcy Code does not recognise this basis of classification between financial creditors. Standard Chartered argued that the insolvency code makes distinction of only financial and operational creditors and nowhere does it make a further distinction between financial creditors during the resolution process.
Sibal, however, said even if it is assumed that there can be differential treatment of financial creditors, then such a classification should only be on the basis of liquidation value of the security enjoyed by the creditor and this should be applied to all the creditors.
The rest of the members of the Committee of Creditors are not differentiating between themselves even though there too differential security interests are involved...Even between other financial creditors there exists those with first-degree charge, second-degree charge, residual charge and subservient charge holders. Where are the priorities there?Senior Advocate Kapil Sibal
Standard Chartered also questioned the decision of the Committee of Creditors to set up a sub-committee which they had authorised to carry out negotiations with ArcelorMittal during the insolvency resolution process.
Sibal argued that during the insolvency process, his clients had objected to the formation of this sub-committee as they believed its purpose was to keep Standard Chartered out of crucial decisions despite being a member of the CoC.
We were deliberately excluded from the sub-committee and from participation in the purported negotiations as it would have derailed the true purpose for such negotiations, which was to deny Standard Chartered its rights, more specifically the payment of 100 percent of its principle as per Arcelor Mittal India’s commitment to this Hon’ble Court.Standard Chartered Bank in Essar Steel Case
The operational creditors for Essar Steel who are yet to begin their arguments also received support from Standard Chartered today which argued that the insolvency code mandates that the creditors at the minimum should receive the fair liquidation value of their claims.
The Supreme Court bench led by Justice Rohinton Nariman will continue hearing the arguments tomorrow.
Follow our daily coverage of Essar Steel hearings in the Supreme Court...
Essar Steel’s Insolvency: Final Lap?
Day 1: Fair, Equitable Treatment Does Not Mean All Creditors Are Equal, Argues Creditors’ Committee
Day 2: Creditors’ Committee Says Insolvency Code Mandates Primacy Of Financial Creditors
Day 3: Standard Chartered Got An ‘Extravagant Bonanza’, Argues SBI