Essar Steel case: Lenders move apex court against NCLAT judgment

Our Bureau Mumbai | Updated on July 12, 2019

Say putting financial and operational creditors at par not good for banks

Lenders led by the State Bank of India (SBI) have filed a petition in the Supreme Court against the National Company Law Appellate Tribunal (NCLAT) judgment allowing at-par treatment of both financial and operational creditors in the Essar Steel case.

Banks are aggrieved that they will realise less from the resolution of the Essar Steel case due to the NCLAT judgment.

So, the committee of creditors (CoC) took a call to move the SC.

The NCLAT earlier this month approved the ₹42,000-crore bid placed by ArcelorMittal to take over Essar Steel.

But the lenders will have to take a larger haircut, as the appellate tribunal has said secured creditors will get only 60.7 per cent of their ₹49,473-crore claims.

The rest will go to operational creditors, hence treating them at par with the financial creditors.

Rajnish Kumar, Chairman, SBI, had on Wednesday indicated that lenders to Essar Steel will appeal to the SC against the NCLAT order.

“Let us see what works out. There have been amendments to the IBC in the past, and if required, there can be more. Let us be patient,” he told reporters at the sidelines of the launch of a book.

Kumar emphasised that putting secured financial creditors at par with operational creditors can be a disincentive.

“We are a different class of creditor,” he had said.

He added that in liquidation, lenders are given top priority along with employees.

He warned that following this ruling, bankers will be hesitant to use the IBC provisions for resolving stressed assets till such a time that the principles of the law are clearly laid out.

Kumar said he hoped that the Supreme Court will clarify the same once they challenge the Essar Steel order by the NCLAT.

Published on July 12, 2019

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