NCLAT Rejects Essar Steel’s Ex-Promoters Plea Challenging NCLT's Order in Favour of Arcelor Mittal

In the latest update on Essar Steel’s insolvency case, the National Company Law Appellate Tribunal (NCLAT) refused Essar Steel’s ex-directors plea to stay the bankruptcy court’s order approving steel giant ArcelorMittal's INR 42,000 crore takeover bid for Essar Steel.

After the Ahmedabad bench of NCLT (National Company Law Tribunal) approved the Arcelor Mittal’s bid on 8 March 2019 to takeover Essar Steel, the company’s three ex-directors challenged NCLT’s order stating that their INR 54,389 crore was superior to Arcelor Mittal’s bid as it clears 100% outstanding of both financial and operational creditors.

Now with NCLAT’s rejection of Essar Steel’s ex-directors plea, the Arcelor Mittal has been indirectly approved as the successful resolution applicant of the company. However, the appellate tribunal has asked Essar Steel’s Committee of Creditors and ArcelorMittal, to submit a fresh money distribution plan for the company.

This is because Standard Chartered has moved to NCLAT against the Arcelor Mittal’s plan as its counsel contended that the bank was being given only 1.7% of its total dues from Essar Steel while other financial creditors, forming part of the CoC, were getting over 85% of their dues. ArcelorMittal's Resolution Proposal involves financial creditors getting INR 41,987 crore out of their total dues of INR 49,395 crore and operational creditors, under the plan, would get just INR 214 crore against the outstanding of INR 4,976 crore.

If the ArcelorMittal plan is implemented, Standard Chartered will only get INR 60 crore against its claims of INR 3,187 crore from Essar Steel.

The NCLAT bench has asked the Committee of Essar Steel lenders to come up with a distribution plan by Monday saying it cannot discriminate on the basis of secured and unsecured creditors. Apart from StanChart, the operational creditors of the company should also get at least 10% of the total resolution plan amount, the NCLAT suggested.

The appellate tribunal has mentioned that all the operational creditors with claims less than INR 1 crore should get 100% of the dues and so should the employees of Essar Steel. Only 90% of INR 42,000 crore should be allowed for financial creditors.