Essar Steel: NCLAT Asks Creditors to Call Fresh Meeting to Consider Fund Distribution

Moneylife Digital Team 20 March 2019

Economy & Nation

The National Company Law Appellate Tribunal (NCLAT) on Wednesday asked creditors of Essar Steel Ltd to reconsider distribution of funds received from ArcelorMittal under the resolution plan. The Tribunal asked resolution professional of Essar Steel to call a fresh meeting of committee of creditors (CoC) to discuss distribution of the Rs42,000 crore received from ArcelorMittal.

The NCLAT was hearing an urgent application moved by Standard Charted bank, an operational creditor of the company. StanChart had raised objections against the National Company Law Tribunal (NCLT)'s approval and claimed dues of Rs3,487 crore against insolvent Essar Steel. But as a second category secured creditor it will get only 1.7% or Rs61 crore under the ArcelorMittal's resolution plan.

Earlier this month, the Ahmedabad Bench of NCLT cleared ArcelorMittal's Rs42,000 crore resolution plan for acquiring Essar Steel. It suggested to distribute the resolution amount in 85:15 ratio between financial and operational creditors.

ArcelorMittal's resolution plan provides financial creditors Rs41,987 crore out of their total dues of Rs49,395 crore and operational creditors, would get just Rs214 crore against the outstanding of Rs4,976 crore.

Essar Steel promoters, in an effort to regain control over the 10 mtpa steel asset, had made a counter offer of Rs54,389 crore, promising 100% payment to all types of creditors, after the committee of creditors (CoC) okayed ArcelorMittal's bid last October.

The total claims admitted in Essar Steel's resolution process was Rs54,389 crore, comprising Rs49,395 crore of financial creditors and Rs4,995 crore of operational creditors. But the NCLT rejected the offer citing Section 12A of the insolvency law.

Comments

User

Gupta

7 years ago

Is NCLAT a legal forum where you debate law or is this a banana republic where you simply follow the mood of the day and create new rules along the way without parliamentary approval? If the law says payments go to secured lenders, so be it. What authority does the court have to have "mercy" on a street smart multinational bank, which chose to lend on unsecured basis and still wants to have a first right on the cash coming in... this is why it is never easy to do business in India despite all the paper ratings that we may get from any global institution. We first need to establish the rule of the law and get crooks behind bars and choke their ability to mess around.