A pedestrian passes in front of the Essar Group corporate offices in Mumbai, India (Photographer: Prashanth Vishwanathan/Bloomberg)

Essar Steel: NCLAT ‘Suggests’ Creditors Committee Reconsider Allocation

The battleground for Essar Steel’s insolvency has now shifted to the National Company Law Appellate Tribunal which today directed the creditors’ committee to reconsider the amount allocated to financial and operational creditors. The appellate tribunal also observed that there cannot be any discrimination between secured creditors.

Earlier this week, the Ahmedabad Bench of the NCLT had approved ArcelorMittal’s resolution plan for Essar Steel but with a similar suggestion to the CoC. It had said the the creditors’ committee could consider allocating 15 percent of the total amount for operational creditors and the remaining 85 percent for financial creditors. ArcelorMittal’s plan entails payment of Rs 42,000 crore to financial creditors and Rs 196 crore to certain operational creditors.

The NCLAT’s suggestion came on the plea by Standard Chartered Bank which argued that it has been discriminated against by the CoC. The bank had argued before the NCLT that against its admitted claim of Rs 3487 crores, the resolution plan has allocated only Rs 60 crores to it- that works out to be a 1.7 percent recovery compared to other financial creditors whose recovery rate is 92 percent.

The appellate tribunal has asked the CoC to convene a meeting and reconsider the distribution of claims among the lenders. It also suggested that 10 percent of the amount can be set aside for clearing the dues of the operational creditors and the remaining can be distributed among financial creditors.

At the hearing, senior advocate Harish Salve argued on behalf of ArcelorMittal and said the company does not have any opinion on distribution of claims but as far as its offer is concerned, it cannot be increased anymore.

''To any concerns that the CoC may have, this is our offer- Rs 42, 000 crore for financial creditors, Rs 196 crore for certain operational creditors, Rs 18 crores for employees and a working capital infusion of around Rs 8,000cr. They are free to reject it. We are not concerned with the distribution and have no role in distribution. Our money is also stuck.'' said Senior Advocate Harish Salve appearing for Arcelor Mittal.

The appellate tribunal also expressed its concern over the timeline of the case which has gone much beyond the 270 day deadline. ‘Our reputation is also at stake because of this case. It has taken more than 500 days. We decide the matter expeditiously, the NCLAT Chairperson said.