Insolvency proceedings: Vedanta allowed to pay Rs 5,320 crore for Electrosteel Steels acquisitionhttps://indianexpress.com/article/business/commodities/insolvency-proceedings-vedanta-allowed-to-pay-rs-5320-crore-for-electrosteel-steels-acquisition-5197816/

Insolvency proceedings: Vedanta allowed to pay Rs 5,320 crore for Electrosteel Steels acquisition

The resolution will be subject to NCLAT’s final order on Renaissance Steel’s challenge to Vedanta bid.

NCLAT allows Vedanta to make upfront payment of Rs 5,320 crore for Electrosteel
Electrosteel owes lenders more than Rs 13,000 crore, of which about Rs 5,000 crore is to State Bank of India alone. (File Photo)

The National Company Law Appellate Tribunal (NCLAT) has allowed Anil Agarwal-controlled Vedanta Ltd to make an upfront payment of Rs 5,320 crore to lenders for acquisition of debt-ridden Electrosteel Steels India Ltd.

NCLAT’s two-member bench said this payment would be subject to the outcome of the petition filed by Renaissance Steel challenging Vedanta’s bid. “During the pendency, the parties may act as far the approved resolution plan and the resolution applicant may deposit the upfront amount to Committee of Creditors subject to the order of the appeal,” the NCLAT bench headed by Chairman Justice S J Mukhopadhaya said.

NCLAT asked the parties to act in terms of the resolution plan, which vacated an earlier order passed by it asking Vedanta and its committee of creditors to maintain status quo in Electrosteel’s corporate insolvency resolution process. Subsequently, if Vedanta’s bid is found to be in contravention of the Insolvency and Bankruptcy Code (IBC), the lenders will revert the amount received, it clarified.

The bench also said that if Renaissance Steel wins the case, then the Committee of Creditors (CoC) will have to return the money to Vedanta.

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The appellate tribunal also reserved its order over Renaissance Steel’s petition. The NCLAT bench made these observations while hearing an appeal by Renaissance Steel India Pvt. Ltd, one of the unsuccessful bidders for Electrosteel, against the April 17 order of National Company Law Tribunal (NCLT) Kolkata bench, approving Vedanta’s Rs 5,320 crore resolution plan for Electrosteel.

Renaissance Steel had contended that Vedanta was ineligible to bid under Section 29A of the IBC as one of Vedanta’s affiliates in Zambia, a unit of its UK-based parent Vedanta Resources Plc, had been found guilty of violating certain environmental laws, punishable with two or more years in jail. It raised a similar objection against another bidder Tata Steel Ltd, claiming that one of its UK subsidiaries had flouted the UK Health and Safety at Work Act, and fines were imposed on it.

Renaissance Steel’s resolution application was rejected by the Committee of Creditors of Electrosteel Steels. On May 1, NCLAT had directed maintaining status quo in the case pertaining to the sale of the debt-laden firm to Vedanta Ltd.

Electrosteel owes lenders more than Rs 13,000 crore, of which about Rs 5,000 crore is to State Bank of India alone.

Money to be reverted if bid cancelled

* NCLAT asked the parties to act in terms of the resolution plan, which vacated an earlier order passed by it asking Vedanta and its committee of creditors to maintain status quo in Electrosteel’s corporate insolvency resolution process

* Subsequently, if Vedanta’s bid is found to be in contravention of the Insolvency and Bankruptcy Code (IBC), the lenders will revert the amount received, it clarified

* Electrosteel owes lenders more than Rs 13,000 crore