The Ahmedabad bench of the National Company Law Tribunal (NCLT) has rejected the settlement offer by Essar Steel’s promoters, the Ruia family, paving the way for the acceptance of ArcelorMittal’s bid for the takeover of the debt-laden company.
The Committee of Creditors had earlier selected the Rs 42,202 crore bid for Essar Steel put in by ArcelorMittal, but Essar later submitted a bid which is Rs 12,000 crore more than the Mittals’s offer. The NCLT decision on Tuesday followed the order of the National Company Law Appellate Tribunal (NCLAT) last week asking the NCLT to pass an order by January 31 on the resolution of the loans. “We allow designated authority (NCLT) to pass appropriate orders by next date, failing which this appellate tribunal will decide,” NCLAT had said on Wednesday, pushing for an early resolution.
“We continue to believe that our offer of Rs 54,389 crore is the most compelling proposal available to Essar Steel creditors. It seeks to repay all classes of creditors and fulfills the IBC’s overriding objective of value maximisation that has been established time and again by courts at all levels. We submitted the proposal under the recently introduced Section 12A of the IBC and the recent judgement of the Supreme Court has established that the section’s provisions are applicable retrospectively,” said an Essar spokesperson.
“We are awaiting a copy of the full NCLT order, and will take a call on next steps after we have thoroughly gone through the contents,” Essar said. The Ruias are likely to the move the NCLAT against the NCLT, sources said.
Essar Steel which owes Rs 54,389 crore to a consortium of banks was in the first list of 12 defaulters prepared by the Reserve Bank of India for resolution under the Insolvency and Bankruptcy Code (IBC).
On October 26, a day after the Ruias — the original promoters of Essar Steel India Ltd — put in the last-minute bid to retain the company within their stable, ArcelorMittal said lenders of Essar Steel had approved a joint offer by ArcelorMittal SA and Japan’s Nippon Steel & Sumitomo Metal Corp as the final bid for the debt-laden company.
Most fiercely contested case under the IBC
The battle for Essar Steel with an annual capacity of 10 million metric tonnes has been one of the most hotly contested under the Insolvency and Bankruptcy Code. While ArcelorMittal had earlier blamed the Ruias’ offer as a tactic to delay the resolution process and against the law, the Ruias had offered to pay up the lenders in full without any haircut. Though the Mittals have won the latest round, there are indications that the Ruias might move the appellate tribunal against the NCLT order in a bid to retain the company in their fold.
The Ruia offer was Rs 12,188 crore more than the Rs 42,202 crore bid put in by ArcelorMittal, which has been selected as the preferred bidder by the lenders in October as part of the corporate insolvency resolution process under the Insolvency and Bankruptcy Code. However, the Ruias did not reveal the source of funds. Lenders had then opposed the Ruias’ bid saying it was not according to the law.
The battle for Essar Steel with a annual capacity of 10 million metric tonnes has been one of the most hotly contested under the insolvency resolution process. While ArcelorMittal had blamed the Ruia’s offer as a tactic to delay the resolution process, the Jindals had supported the Ruia bid. On January 7, NCLT’s Ahmedabad bench reserved judgment on the maintainability of Essar Steel promoters’ last-minute bid to regain control of the 10 mtpa steel company.
ArcelorMittal had said it intends to increase Essar Steel’s finished steel shipments to 8.5 million tonnes over the medium term. The long-term plan is to increase finished steel shipments to between 12 and 15 million tonnes through the addition of new iron and steelmaking assets, ArcelorMittal said.
“The overriding objective of the IBC is maximisation of recovery for creditors and this has been established time and again by courts at all levels. Creditors of Essar Steel, including operational creditors, should not be forced to accept a resolution plan which undervalues the company and its assets,” Essar said.
Anticipating an early decision on loans stuck in debt-ridden Essar Steel, State Bank of India, which had recently put Rs 15,431 crore worth bad loans belonging to the Essar group firm for auction, had said it will delay the process. “As far as the sale of Essar Steel loan is concerned, we’ve already deferred it to February 11. Hopefully, a decision in this matter is reached before that. We will wait and see,” Rajnish Kumar, Chairman, State Bank of India, had said last week.
Bankers said an application for withdrawal of insolvency proceedings, under section 12A of the Insolvency and Bankruptcy Code, 2016, can only be considered if it’s filed by the applicant who initiated insolvency in the first place. State Bank of India and Standard Chartered Bank had filed insolvency cases in the Essar Steel insolvency case. The battle for the control of Essar Steel, the biggest bad loan resolution in the banking system, has now entered the last phase with the lenders anticipating a sizeable recovery of money amid the slugfest between the ArcelorMittal and the Ruias, the contenders for the steel company.