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Ruias' offer not maintainable, Essar Steel lenders tell NCLT

NCLT postponed the hearing to December 10, saying that the bench was not in full strength

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Shashi Ruia
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Lenders to debt-laden Essar Steel told National Company Law Tribunal (NCLT), Ahmedabad bench to dismiss the last minute bid put forward by Essar Steel Asia Holding (Ruias), adding that it is not "maintainable".

Arguing before the court, both the counsels for the creditors and ArcelorMittal explained why the late proposal of Ruias, who are the original promoters of Essar Steel, is not maintainable. The Ruia plan is not tenable based on the Supreme Court judgment, they said. The court was also told that Ruias made offers on four occasions in the previous months, all of which were rejected by the resolution professional (RP) as they did not meet the requirements, including the one on eligibility. The counsel for ArcelorMittal said the company had been issued a letter of intent by the lenders to conduct the sale of Essar Steel.

Mihir Joshi, counsel for Essar Steel, said maximisation of value is the key to Insolvency and Bankruptcy Code 2016, adding that the lenders' action was in haste.

NCLT has postponed the hearing to December 10, saying that the bench was not in full strength.

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. It also offered to pay another Rs 2,000 crore for the Odisha oil slurry, taking their total payout for the debt-laden company to Rs 52,000 crore. This, lenders said, could also be taken on lease by the company.

After the creditors voted overwhelmingly in favour of the ArcelorMittal offer, Essar Steel Asia Holding Ltd., the promoter of Essar Steel, sprung a surprise 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. Standard Chartered Bank, a secured lender, did not vote in favour of the proposal and also filed a petition in the NCLT against the resolution plan.

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 Insolvency and Bankruptcy Code 2016. 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.

About 28 operational creditors have filed cases in the Ahmedabad bench of the NCLT, asking the tribunal to stay further resolution proceedings till their grievances are addressed. They have requested the court to direct the lenders to clear their dues by altering the ArcelorMittal's resolution plan and alternatively asked the tribunal to accept the Ruias's proposal that assures to repay all the creditors their full dues. The counsel for the operational creditors said that the court should consider Essar Steel promoter group's offer of Rs 54,389 crore.

Lenders are of the view that the process should continue as per law and serve as a lesson for promoters who do not take financial responsibility.

NEXT HEARING

  • NCLT postponed the hearing to December 10, saying that the bench was not in full strength
     
  • The counsel for ArcelorMittal said the company had been issued a letter of intent by the lenders to conduct the sale of Essar Steel
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