In a setback to the Ruia family, the Ahmedabad bench of the National Company Law Tribunal (NCLT) has rejected its offer to withdraw Essar Steel from the insolvency court. The NCLT bench will now hear the resolution plan submitted by ArcelorMittal from January 30.
The Ruias, the promoters of Essar Steel, had presented a Rs 54,389 crore proposal to withdraw the debt-laden company from the NCLT. But the court pointed out that the application for withdrawal of insolvency proceedings under Section 12A of the Insolvency and Bankruptcy Code, 2016, can be considered only if it is filed by the applicant who initiated the insolvency, which in this case are State Bank of India (SBI) and Standard Chartered Bank.
There is no illegality in the lenders accepting the ArcelorMittal proposal, the NCLT said in its order. Earlier, nearly 99% of the committee of creditors (CoC) had voted in favour of ArcelorMittal's proposal.
Essar Steel can now appeal in the National Company Law Appellate Tribunal (NCLAT) asking for its proposal, which is higher than ArcelorMittal's bid, to be considered, according to an advocate who specialises in NCLT cases. "Ruias are sure to appeal in a higher court," said the advocate.
In a bid to complete large stressed accounts, the central government has set a March deadline for lenders and resolution professionals to speed up the revival plans for nine of the 12 insolvency cases, with special focus on Essar Steel and JP Infratech.
Welcoming the NCLT order, ArcelorMittal said that it "protects the integrity of the IBC and ensures its legitimacy as a rules based law." The Luxembourg-based global steel major said this "is a positive development for both Essar Steel India and the country more broadly. We hope now for a swift resolution to this case".
The Ruias are, however, hopeful. "We continue to believe that our offer of Rs 54,389 crore is the most compelling proposal available to Essar Steel creditors. It seeks to repay all classes of creditors and fulfills the IBC's overriding objective of value maximisation that has been established time and again by courts at all levels. We submitted the proposal under the recently introduced Section 12A of the IBC and the recent judgment of the Supreme Court has established that the section's provisions are applicable retrospectively," the Ruias said in a statement.
It may be recalled that ArcelorMittal had made an offer of Rs 42,000 crore upfront payment and another Rs 8,000 crore of equity infusion into the company over a five-year period to acquire Essar Steel. The lenders accepted this proposal, barring Standard Chartered Bank, which voted against and also filed a petition in the NCLT against the resolution plan.
After the creditors voted overwhelmingly in favour of the ArcelorMittal offer, Essar Steel Asia Holding Ltd, the promoter of Essar Steel, sprung a surprise on October 25 by proposing to pay Rs 54,389 crore to clear all dues of the financial and operational creditors in a last-ditch effort to regain ownership of their flagship company.
Essar Steel was one among the dirty dozen that the Reserve Bank of India (RBI) had handpicked in the first list of non-performing assets (NPAs) to be resolved under IBC. However, prolonged litigations continue to delay the change of management.
On October 4, the Supreme Court had granted one more opportunity to ArcelorMittal and NuMetal to bid for Essar Steel if they cleared the NPA dues of their related corporate debtors within two weeks. Following this directive from the apex court, ArcelorMittal paid off Rs 7,469 crore to creditors of Uttam Galva and KSS Petron, thus making it eligible to acquire Essar Steel. NuMetal failed to clear the dues and was thus taken off the bid table.
ENTER THE MAZE
- Rs 54,389 crore – Offered by Ruias for Essar Steel
- 99% of the committee of creditors had voted in favour of ArcelorMittal's proposal
- Rs 42,000 crore – upfront payment offer made by ArcelorMittal
- Rs 8,000 crore – equity infusion it plans over five years in the company
- Rs 7,469 crore – ArcelorMittal paid off to creditors of Uttam Galva and KSS Petron
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