NCLAT rejects Ruia's offer to block ArcelorMittal; approves offer for Essar Steel with modification

New Delhi, July 4 () On Thursday, the NCLAT approved the steel tycoon Lakshmi Mittal led by ArcelorMittal Rs 42,000 for the acquisition of Essar Steel after it rejected a statement from the main shareholder of the debt-laden firm that questions the bidder's eligibility.

However, the National Companies Law Appeal Court (NCLAT) granted operational creditors the same status as lenders in distributing the ArcelorMittal offer amount among the creditors of Essar Steel.

Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 million unpaid ruptures from financial lenders and operating creditors.

The NCLAT said that financial creditors will obtain 60.7 percent of their admitted claims of Rs 49,473 crore. The rest would go to the operational creditors.

The Steel Creditors Committee of Essar (CoC) will not have any role in the distribution of Rs 42,000 crore, ruled at the time that allowed claims from operative creditors such as Dakshin Gujarat, Gujarat Energy, Bharat Petroleum, Indian Oil, GAIL, ONGC and NTPC .

ArcelorMittal had told NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for the acquisition of Essar Steel's debt in the insolvency proceedings.

On the issue of ArcelorMittal's eligibility, NCLAT said that the Supreme Court had already solved the problem and that it can not be shaken again and again.

Any attempt of this kind is clearly prohibited by the principles of res judicata, he said. Therefore, the preferred application by the appellant, Mr. Prashant Ruia and the financial controller, 'Essar Steel Asia Holdings Limited' deserves to be rejected.

While financial creditors may choose to appeal against the decision in the Supreme Court, a spokesperson for Essar Steel said: It seems that the new facts related to ineligibility under Section 29A that arose only after the previous ruling of the Supreme Court, they have not been properly considered. We are waiting for the detailed order and decide our course of action thereafter.

A spokesperson for ArcelorMittal said: We take note of today's decision of the NCLAT. We need to review the complete written order to understand any implications on the completion of the transaction.

A two-judge bench of NCLAT headed by Judge SJ Mukhopadhaya on the 116-page order said that the issue of ArcelorMittal India's eligibility has been adjudicated after considering all the arguments of the Supreme Court and could not be reopened to the Court. Appeals Authority at a stage where the approval of the 'Resolution Plan' is being considered.

The Ahmedabad Bank of the National Societies Law Court approved on March 8 the offer submitted by ArcelorMittal India for the acquisition of Essar Steel. Essar Steel's director, Prashant Ruia, challenged that order by saying that ArcelorMittal was not eligible to bid under Section 29A of the Insolvency and Bankruptcy Code, as it was associated with delinquent or defaulting firms.

His petition had accused ArcelorMittal of fraudulently falsifying, suppressing and misrepresenting facts had not noticed that he was not eligible because his promoter, Lakshmi Mittal, had not completely dissociated himself from all the businesses of his brothers, Pramod and Vinod Mittal. .

ArcelorMittal responded to this by saying that the motive was one of multiple attempts in bad faith to derail the corporate insolvency resolution process and Ruia had no locus standi since its resolution plan was rejected.

Operational creditors had also opposed ArcelorMittal's resolution plan saying that they were receiving a hypothetical payment, while 92.5 percent of the debt of financial creditors was being paid.

The NCLAT said that the 'Financial Creditors' can not be discriminated against by 'Insured' or 'Unsecured Financial Creditors' for the purpose of distributing the proposed amount among the interested parties. He went on to say that Standard Chartered Bank had been discriminated against by the Creditors Committee, because he has no charges in the corporate debtor's project assets (Essar Steel).

These reasons are also not based on the fact that the Standard Chartered Bank had already been considered as a 'Guaranteed Financial Creditor' that had already invoked its guarantee, he ruled.

The court noted that financial creditors whose claims are less than Rs 1 crore will get 100 percent of their claims, while other financial creditors will get 60.7 percent of their claims.

We have distributed all claims among financial creditors, including Standard Chartered, based on 60.7 percent, he said.

In addition, employees and those operational creditors whose claims are less than Rore 1 crore will get 100 percent of their claim, while other operational creditors will get 59.61 percent, he said. In addition, he noted that the amount of profit generated by Essar Steel during the corporate insolvency resolution process (CIRP) can not be granted to the successful resolution applicant Arcelor Mittal, since he has not invested money. Essar Steel has reported an Ebitda of around 4,000 million rupees during the more than 600 days of the insolvency period. RSN ANZ MR MR

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