An appellate tribunal told Essar Steel NSE 0.00 % Asia Holdings (ESAH) that its Rs 54,389-crore resolution plan for Essar Steel would only be considered if the entity cleared the Essar Group’s entire bad debt.
That added another twist to the long-drawn Essar Steel resolution process, which seemed to have taken a decisive turn after the Ahmedabad bench of the National Company Law Tribunal (NCLT) approved ArcelorMittal’s Rs 42,000-crore bid for the company last week.
“Think of Rs 80,000 crore more, we will make some room for you, whatever the amount is,” said a two-member bench of the National Company Law Appellate Tribunal (NCLAT) led by justice SJ Mukhopadhaya on Thursday. “We may consider (the ESAH proposal) if (you pay) whatever — Rs 80,000 or Rs 90,000 (crore) — dues you have plus Rs 54,000 crore (for Essar Steel).”
This suggests the tribunal may consider letting the Ruias, founders of the Essar Group and the erstwhile promoters of Essar Steel, enter the race for the latter if ESAH can come up with about Rs 1.4 lakh crore, which might be difficult.
In addition, the tribunal also asked ArcelorMittal why it should not be paying more for the asset. The observations came during the hearing of the appeal filed by ESAH against the NCLT order.
ArcelorMittal’s bid includes an infusion of Rs 8,000 crore into Essar Steel over a period of time. ESAH had proposed to pay Rs 54,389 crore to settle all dues to financial and operational creditors of Essar Steel.
A key section of the Insolvency and Bankruptcy Code seeks to exclude erstwhile promoters from bidding for assets so that they don’t get a chance to regain control after having defaulted on loans.
However, the NCLT decision approving the ArcelorMittal deal has also been opposed by lender Standard Chartered Bank, which called the plan “discriminatory” and said the entire resolution had been conducted in a manner “contrary to the law”.
If the ArcelorMittal plan is implemented, Standard Chartered will only get Rs 60 crore against its claims of Rs 3,187 crore from Essar Steel. The bench also asked ArcelorMittal why it should only pay Rs 42,000 crore if the asset’s value exceeds Rs 54,000 crore. The bid was approved by Essar Steel’s committee of creditors last year. “That is a basic question — if parties are ready to pay Rs 54,000 crore, why don’t you?” justice Mukhopadhaya said.
Senior counsel Abhishek Manu Singhvi, who was representing ArcelorMittal, questioned EASH’s ability to pay the proposed amount.
The resolution of Essar Steel’s debt has been tied up in legal proceedings for almost two years.
The case is among the first 12 that the Reserve Bank of India had asked banks to proceed with under the IBC. The case will next be heard on Friday.
Source: Economic Times