Companies

Essar Steel: Sibal questions creditors’ panel rights on distribution of funds

Our Bureau Mumbai | Updated on May 14, 2019 Published on May 14, 2019

Says lower bid by ArcelorMittal a ‘scam’ to settle debt of Orissa Slurry Pipeline Infrastructure

Senior lawyer Kapil Sibal termed acceptance of a lower bid by ArcelorMittal for Essar Steel’s asset as a ‘scam’ to settle the debt of unrelated company Orissa Slurry Pipeline Infrastructure (OSPIL), and favour the winning bidder.

Continuing his argument in the case on Tuesday, Sibal said the illegality in acceptance of ArcelorMittal’s bid was the result of secret negotiations between the core committee and ArcelorMittal, and this was to the detriment of all other creditors.

Sibal also submitted a nine-page note before the NCLAT while arguing on behalf of Standard Chartered Bank (SCB).

Asked by the judge whether he has come to derail the resolution plan, Sibal said: “I have come here for ₹2,500 crore (of SCB) and (against) discrimination.”

The Bench observed that out of the 10 lenders who are financial creditors to Essar Steel, 5-6 are lenders to OSPIL as well, and wanted to know if ₹2,500 crore would go only to these lenders. Sibal asked how the core committee could have decided on distribution of proceeds by colluding among themselves.

The Bench said that it would decide on the power of CoC, and also the feasibility of such an incident.

‘Prejudiced SCB’s rights’

Sibal said the reduction in the upfront amount from ₹42,000 crore to ₹39,500 crore, as well as the agreement to delegate the manner of distribution was evidently designed to prejudice the right of SCB, which was supposed to receive 100 per cent of its outstanding.

Sibal argued that the “distribution of the financial package is illegal and discriminatory, and not within the domain of CoC”.

He said the CoC includes SCB by virtue of it being a secured financial creditor of Essar Steel, and cited judgments to aver that such a creditor is entitled to be treated equally with all others .

The collusion among the core committee members resulted in unequal treatment of creditors under the same category, he said.

Published on May 14, 2019
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