In a major setback for the Ruias, the promoters of Essar Steel India Ltd (ESIL), the Ahmedabad Bench of the National Company Law Tribunal (NCLT) on Tuesday rejected their plea seeking to be allowed to place an offer for resolution of the beleaguered steel company.
Rejecting the Interlocutory Application (IA) 430 by Essar Steel Asia Holdings Ltd (ESAHL) as non-maintainable, the two-member Bench held that ESAHL did not have a locus standi to make an offer for debt resolution as a resolution applicant. Earlier, ESAHL had asserted its right to redeem ESIL for ₹54,389 crore in a settlement offer.
But ESIL’s Committee of Creditors (CoC), Insolvency Resolution Professional (IRP) Satish Kumar Gupta and rival bidder ArcelorMittal had argued against ESAHL’s offer, terming it non-maintainable and challenging its locus standi. Reading from the operative part of the order, the Bench said: “We do not find any irregularity or illegality in the decision of the resolution professionaland the CoC in not considering the settlement plan (of Essar shareholders).”
The SBI-led lenders had voted in favour of ArcelorMittal’s offer of ₹42,000 crore. On Tuesday, the IA 430 was rejected by NCLT Ahmedabad on the grounds that it was not maintainable under Section 60(5) of the IBC. As per the order, the scope of the settlement proposal under Section 60(5) would not be proper when a specific provision under Section 12A had already been incorporated.
Reading out the order, Justice Harihar Prakash Chaturvedi said: “It is a certain position as per the decision of the NCLAT that the shareholder cannot have a legal right post submission of insolvency petition. The present applicant (ESAHL) did not choose to file such an application either before this adjudicating authority or the NCLAT nor the Supreme Court. This should have been done at the relevant time.”
The Bench referred to the January 25 Supreme Court order, which upheld the constitutional validity of the IBC and Section 12A. Under Section 12A, the adjudicating authority may allow the withdrawal of application admitted under Section 7, 9 or 10 on an application made by an applicant with the approval of 90 per cent voting share of the CoC. ArcelorMittal’s plan was approved by the CoC with 92 per cent votes in its favour. The Bench noted that ESAHL’s application was not in terms of Section 12A since it was not by a resolution applicant.
Welcoming the order, an ArcelorMittal spokesperson said: “We welcome the ruling by the NCLT which protects the integrity of the IBC and ensures its legitimacy as a rules-based law.”
An Essar spokesperson said: “We continue to believe that our offer of ₹54,389 crore is the most compelling proposal available to Essar Steel creditors. 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 Bench will continue its course of hearing ArcelorMittal’s resolution plan as approved by the CoC. The Essar promoters are expected to take a call on the next course of action after the issue of the written order.