Companies

Essar Steel: NCLT orders ArcelorMittal to pay ₹1,300 crore to SREI Infrastructure

Suresh P Iyengar Mumbai | Updated on November 11, 2020

ArcelorMittal along with Japanese company Nippon Steel had jointly bid successfully for Essar Steel

The cost was for using SREI Infra-owned slurry pipeline during insolvency period

The National Company Law Tribunal (NCLT) has directed ArcelorMittal Nippon Steel India to pay ₹1,300 crore to SREI Infrastructure for using the slurry pipeline during the insolvency period.

ArcelorMittal along with Japanese company Nippon Steel had jointly bid for Essar Steel and paid ₹42,000 crore last December to complete the deal through ArcelorMittal Nippon Steel India (AM/NS).

However, SREI Infrastructure, which owns 69 per cent in Odisha Slurry Pipeline India, moved the NCLT, Ahmedabad claiming that ArcelorMittal had agreed to pay the entire cost to keep Essar Steel asset as going concern during the insolvency period, but did not pay for using a critical slurry pipeline. The 253-km slurry pipeline connected AM/NS India’s iron ore benefication plant in Dabuna with the 12 million tonne pellet plant at Paradip.

ArcelorMittal did not comment on the NCLT order.

In a 322-page order, NCLT said the usage charges of slurry pipeline for running the corporate debtor (Essar Steel) as a going concern during CIRP (Corporate insolvency resolution process) of the corporate debtor are IRP (insolvency resolution process) cost.

Resolution plan

Such IRP costs have been duly considered and provided by the resolution applicant (AM/NS) in the resolution plan... approved by the Adjudicating Authority.

The resolution applicant has contravened the provision of such approved resolution plan by not making payment of IRP costs.

“The resolution applicant is directed to make the payment of IRP costs to OSPIL by December 15. In case it is not complied with the applicant is directed to intimate us so that we can pass an appropriate order under Section 33(4) of the IBC Code,” said Justices Madan Balachandra Gosavi and Virendra Kumar Gupta in their order.

“We are conscious of the fact that insolvency resolution was the largest in the country, but that itself cannot be preclude a quasi-judicial institution to act within the four corners of governing statute...,” the order said.

“... no business man comes for a charity and if the replacement cost of the plant of this magnitude, factors of acquisition of a going concern giving immediate returns on the investment without any gestation period... then such acquisition appears to be a good bargain. Hence considering this, leave apart our legal findings, we hope this issue is resolved amicably,” it added.

Darshan Upadhyay, Managing Partner, Stratage Law Partners, said the IBC provides for recovering costs that are incurred for running the business as going concern and if the charges were accounted for and remain unpaid, they may be recovered under the Act.

Nadiya Sarguroh, Senior Associate, MZM Legal, said considering the resolution plan of ArcelorMittal also provided for the payment of CIRP costs it is interesting to see how the ambit to challenge the compliance of the Resolution Plan has been widened by this judgment of the NCLT Ahmedabad directing ArcelorMittal to comply with the Resolution Plan under the Code subject to which a liquidation order may be passed.

Published on November 11, 2020

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