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Essar Steel within Lakshmi Mittal’s grasp; NCLAT tells ArcelorMittal to keep Rs 42,000 crore ready

Surya Sarathi Ray
Essar Steel case, NCLAT, ArcelorMittal, Industry, news, LN Mittal, SBI, Essar Steel,

Even as ArcelorMittal seems wary of the lack of a definitive and final word from the National Company Law Appellate Tribunal (NCLT) on how its bid amount of Rs 42,000 crore would be distributed among the creditors to Essar Steel, the tribunal on Tuesday asked the NRI billionaire LN Mittal-led firm to be ready for upfront payment of the promised amount without any further procrastination.

While the appellate tribunal s directive displayed its impatience with the perceived delay on the part of the global steel giant in turning up with the promised amount, it also signalled the deal to salvage the debt-laden Indian steel company is close to being executed. NCLAT hinted that it might ask ArcelorMittal to deposit the money with an escrow account of either the insolvency court (NCLT) or the appellate tribunal itself in the next hearing, scheduled on April 23.

While ArcelorMittal s counsel said though the firm was ready with the money, it could not deposit the same without lenders executing a debt assignment agreement in favour of the company. The counsel also alleged that there was some sort of reluctance on part of the lenders to put the debt assignment agreement into effect. However, despite this contention by ArcelorMittal, the bench headed by NCLAT chairperson justice SJ Mukhopadhaya directed the company to submit an affidavit detailing the steps to be taken towards implementation of the resolution plan for the debt-laden steel firm.

There is a dispute between the financial creditors led by the State Bank of India (SBI) and other creditors on the redistribution of the bid amount. The appellate tribunal, while refusing to stay the NCLT-Ahmedabad order approving ArcelorMittal s bid to take over Essar Steel, had directed the lenders to jointly consider redistribution of the bid amount of Rs 42,000 crore as per the tribunal s March 8 order, which had suggested an 85:15 distribution between the financial and operational creditors against the 90:10 ratio proposed in the resolution plan approved by the committee of creditors (CoC).

The NCLAT also directed lenders to consider a larger payout to Standard Chartered Bank, which had made the highest claim of around Rs 3,500 crore among unsecured creditors, against Rs 61 crore or 1.7% of the admitted claims, as approved by the CoC. Though the appellate body did not put its foot down on the redistribution matter, its stand apparently did not boost the bidder s confidence. The SBI opposed NCLAT s recommendation to give StanChart a higher amount than under the approved resolution plan, arguing that the private bank, being not a secured creditor, is not eligible to make any additional claim.

Hearing multiple petitions filed by operational creditors, the Gujarat state tax department and others, the NCLAT bench on Tuesday also directed the financial and operational creditors to Essar Steel to file within a week a one-page affidavit each giving details of their claims admitted by resolution professional and those approved by the CoC. It also asked the Gujarat tax department to file an affidavit over its claims.

ArcelorMittal s resolution plan, involving an upfront Rs 41,987-crore payment to the financial creditors against their Rs 49,395-crore admitted claim and Rs 214 crore to the operational creditors against their Rs 4,976-crore outstanding, was approved by the CoC on October 24, 2018. The Ahmedabad bench of the NCLT gave its go-ahead to this on March 8, 2019.

Reiterating its earlier order, the NCLAT suggested the CoC should not discriminate against the operational creditors in the distribution of the ArcelorMittal bid amount. Hearing SCB s plea on discrimination in the distribution of funds, the NCLAT had earlier said CoC should not reserve over 90% of the bid amount for the financial creditors and leave just 4% for operational creditors. If the CoC-approved plan is implemented, SCB will only get `60 crore against its claims of `3,187 crore from Essar Steel.

Lenders to the Essar Steel on Tuesday informed the NCLAT that they have decided to give an additional `1,000 crore to the operational creditors, but nothing additional to SCB. In its March 18 order, the NCLAT said it never intended to interfere with the NCLT-approved resolution plan and there would be no setting aside of the tribunal s order on the ground of discrimination in the distribution of funds.