NCLT clears ArcelorMittal’s ₹42,000-cr plan for Essar Steel

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on Friday approved ArcelorMittal’s ₹42,000-crore resolution plan for the insolvent Essar Steel India Ltd (ESIL).

This allows the LN Mittal-led global steel major to gain a foothold in the Indian market. Essar Steel has a steel plant with a capacity of 10 million tonnes per annum at Hazira in Gujarat.

ArcelorMittal’s resolution plan was approved by the ESIL Committee of Creditors (CoC) led by SBI with a majority vote in October last year. Under the plan, 92 per cent of the total amount will be distributed among the financial creditors, while the operational creditors (OCs) with dues of less than ₹1 crore stand to get the remaining 8 per cent.

Fair deal for OCs

While finding the plan approval to be compliant with the Insolvency and Bankruptcy Code (IBC), the two-member Bench of Harihar Prakash Chaturvedi and Manorama Kumari suggested to the CoC that on the principle of equity, OCs must not get discriminated against.

“We suggest to the CoC that 85 per cent of the total amount received...be distributed among the financial creditors instead of 92 per cent. The remaining 15 per cent may be distributed among the OCs, which includes government companies and public sector undertakings as well,” it said.

The OCs, apart from unsecured financial creditor Standard Chartered Bank (SCB), had challenged the ArcelorMittal plan citing unfair treatment. The tribunal suggested that SCB be included with the financial creditors in receiving the 85 per cent share.

On ArcelorMittal’s demand for immunity from past tax and legal liabilities, the Bench said it was out of its jurisdiction to give such an immunity and left it to “the wisdom of the competent government authorities to decide”.

It turned down a plea of the suspended management of ESIL seeking to participate in CoC meetings to consider the resolution plan.

ESIL promoters, meanwhile, are likely to move the National Company Law Appellate Tribunal (NCLAT) on Monday challenging the NCLT order. The appellate tribunal had earlier directed NCLT Ahmedabad to pass the order by March 8, following which it would hear the case.

In January, the Bench had rejected Essar promoters’ settlement offer of ₹54,389 crore as “non-maintainable”. “We continue to believe our settlement proposal of ₹54,389 crore is the most compelling one available to Essar Steel creditors and fulfils the IBC’s declared overriding objective of value maximisation,” said an Essar spokesperson. “We are awaiting a copy of the NCLT order, and will take a call on the next steps after examining the same.”

Soon after the judgment, the counsels of Essar Steel, SCB and OCs sought a stay on the implementation of the NCLT order approving ArcelorMittal plan. The Bench said it will consider this and pronounce an order on the request on Monday.