A day after National Company Law Appellate Tribunal (NCLAT) asked financial creditors to handover Essar Steel to ArcelorMittal, the Ruias-led promoters group on Wednesday claimed that its belated bid was higher by Rs 12,000 crore.
Essar group promoters argued that they should be allowed to payoff the entire debt of existing creditors and cited Insolvency and Bankruptcy Code (IBC) objective of maximising recovery for creditors.
Essar Steel said that the Rs 54,389-crore offer by its shareholders to payoff all financial and operational creditors were much superior vis-à-vis the rival ArcelorMittal’s proposal. The Ruias contended that lenders should not be pressured into giving control of the company to any entity that undervalues Essar Steel.
On January 23, NCLAT directed Ahmedabad bench of NCLT to pass an order on the insolvency resolution plan submitted by resolution professional with ArcelorMittal emerging highest bidder. Essar group’s proposal came in with a huge time lag after Committee of Creditors (CoC) approved the ArcelorMittal bid.
Two-member bench of NCLAT headed by Justice S J Mukhopadhaya said that if the Ahmedabad bench of NCLT does not pass any order by January 31, then it would take a call at the next hearing.
The appellate tribunal has listed the matter for further hearing on February 4. “We allow designated authority (NCLT) to pass appropriate orders by next date, failing which this appellate tribunal will decide,” said the NCLAT.
Hitherto, ArcelorMittal had offered to pay creditors Rs 42,000 crore as part of its deal to takeover Essar Steel that faced insolvency proceedings. Essar Steel had piled up unpaid loans worth Rs 50,800 crore. CoC had consented to ArcelorMittal bid. Our proposal provides for payment of Rs 54,389 crore to various creditors that exceeds the resolution plan approved by the creditors by more than Rs 12,000 crore, an Essar Steel statement said.
Essar Steel promoters made the proposal under the recently introduced Section 12A of the IBC. “Under the proposal made by the shareholders, all classes of creditors would receive full recovery of their claims,” the Essar Steel statement said. When ArcelorMittal won the bid for Essar Steel, this section of IBC was not part of the act. New section 12A of IBC introduced last year stated that adjudicating authority may allow withdrawal of insolvency proceedings on an application made by the applicant with the approval of 90 per cent voting share of the committee of creditors (CoCs). “Under the provisions of the IBC, a proposal made under Section 12A is to be decided between the creditors of Essar Steel and the company,” Essar Steel statement said, adding that creditors have already been provided all relevant information on the proposal.
“No request has been received from the committee of creditors of Essar Steel regarding any further information that they need in this regard,” it added.
There was no requirement to provide any details to a resolution applicant, i.e. the bidder. ArcelorMittal had on Tuesday stated that there are certain parties in India who would like that the IBC not be implemented according to the law.
“The IBC was introduced for a very serious reason to address a major problem with bad loans. If the law is not implemented correctly and the rules are flouted, as suggested by some, this sends a negative signal about the certainty of India as an investment destination,” the statement said.