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Essar Steel acquisition: NCLAT rejects Ruias’ plea; approves bid with modification by ArcelorMittal

ArcelorMittal had told NCLAT it would pay Rs 42,000 crore for acquiring debt-laden Essar Steel.

The National Company Law Appellate Tribunal (NCLAT) on Thursday rejected a petition filed by the promoters of Essar Steel challenging ArcelorMittal SA s proposed takeover of the debt-ridden steel company, paving the way for LN Mittal s entry into the Indian steel sector.

Essar Steel Asia Holdings Ltd (ESAHL), which holds a significant stake in Essar Steel, had moved the appellate tribunal seeking rejection of ArcelorMittal s Rs 42,000 crore bid to acquire the steelmaker, alleging that its promoter LN Mittal hid his association with loan defaulting firms run by his brothers.

The plea by ESAHL, which is owned by the Ruias, alleged that Mittal was a promoter of GPI Textiles Ltd, Balasore Alloys Ltd and Gontermann Piepers (India) Ltd firms that are run by his brothers Pramod and Vinod Mittal which were classified as non-performing assets (NPAs) by different banks.

On the issue of eligibility of ArcelorMittal, NCLAT said the apex court had already settled the issue and the same cannot be re-agitated again and again. Any such attempt is clearly barred by the principles of res judicata, it said. Therefore, the Application preferred by the Appellant Mr. Prashant Ruia and Intervenor Essar Steel Asia Holdings Limited deserves to be rejected.

We note today s ruling by the NCLAT. We need to review the full written order to understand any implications on completion of the transaction, a spokesperson for ArcelorMittal said on Thursday.

The company s resolution plan, with modifications, for Essar Steel will now reflect the distribution of amount for all operational and financial creditors.

The apex court had earlier halted distribution of funds among operational and financial creditors from ArcelorMittal s resolution plan for Essar Steel. Insolvency and Bankruptcy Code (IBC) rules had earlier compelled Mittal to shell out an additional Rs 7,000 crore to clear bank dues of Uttam Galva Steels and KSS Petron, where he held some stake and reportedly sold his holdings in one of them for Re 1 a share.

It appears that new facts regarding ineligibility under Section 29A, which emerged only after the previous judgement of the Supreme Court, have not been given due consideration. We are awaiting the detailed order and will decide our course of action thereafter, an Essar spokesperson said after the NCLAT ruling.

On March 8, ending months of uncertainty, the Ahmedabad bench of the National Company Law Tribunal (NCLT) had approved ArcelorMittal s Rs 42,000 crore resolution plan for the debt-laden Essar Steel.

However, directors of Essar Steel s promoter firm, the Ruias, had challenged the NCLT order, saying that ArcelorMittal was ineligible to bid under Section 29A of the IBC. alleging his association with delinquent of loan defautling firms. The takeover proposal of ArcelorMittal for the Essar Steel was approved by the latter s Committee of Creditors (CoC) in October 2018. It had rejected the settlement proposal of Rs 54,389 crore made by Essar promoters.

ArcelorMittal countered this saying the plea was one of the multiple mala fide attempts to derail the corporate insolvency resolution process and Ruia had no locus standi as his resolution plan was disallowed.