NCLAT Gives Conditional Approval to Arcelor Mittal's Rs. 42,000 Crore Resolution Plan to Take over Debt-Laden Essar Steel

NCLAT Gives Conditional Approval to Arcelor Mittal's Rs. 42,000 Crore Resolution Plan to Take over Debt-Laden Essar Steel

On Monday, March 18, National Company Law Appellate Tribunal (NCLAT) ruling in a major win for the global steel giant Arcelor Mittal, the Appellate Tribunal two-member bench headed by Chairperson Justice SJ Mukhopadhaya approved the Arcelor Mittal's Rs 42,000 crore resolution plan to take over debt-laden Essar Steel, subject to a final order.

The Tribunal nodded for the constitution of a Monitoring Committee, since there was no stay on the Arcelor Mittal’s resolution plan and made it clear that the resolution professional will have to adhere to the procedure laid by law and ensure that the company is a going concern.

The Appellate Tribunal in today's order also directed the Insolvency and Bankruptcy Board of India to file an affidavit stating the average payment received by a corporate debtor’s financial and operational creditors in a corporate insolvency resolution process.

In its previous hearing on Friday, March 15, the  NCLAT had refused to impose a stay on the NCLT order approving the resolution plan put forward by Arcelor Mittal to take over debt-laden Essar Steel Ltd and had sought for submission of a new resolution plan to facilitate distribution of the bid amount among the financial and operational creditors.

The former promoter of Essar Steel, Prashant Ruia along with two other directors of the erstwhile steelmaker had moved the NCLAT on March 11, against Arcelor Mittal’s bid and NCLT March 8 order approving the same.

Moreover, the approved takeover has also been challenged by Standard Chartered Bank (SCB), a dissenting bank among the Committee of Creditors (CoC) of Essar Steel. The Bank has raised its concerns pertaining to the resolution plan approved by the CoC of Essar Steel contending that it is more inclined towards the secured creditors.

Arcelor Mittal, a joint venture with Japan’s Nippon Steel & Sumitomo Metal Corp has offered a cash settlement of Rs. 42,000 crores to lenders and an Rs. 8,000 crore capital infusion. Moreover, as per its annual report, the global steel giant is planning a capital expenditure programme for the assets till 2024. However, if the Mittal resolution plan is implemented, the dissenting bank SCB will only receive Rs. 60 crores against its claim of over Rs. 3,000 crores from Essar Steel.

A proposal claiming 92 per cent of the bid amount was made by the CoC, further leaving merely 4 per cent of the amount for operational creditors. However, the bench has recommended that all operational creditors below Rs. 1 crore shall get 100 per cent of the dues, alongside the employees of Essar Steel, thereby assigning 90 per cent of the amount to financial creditors.

Earlier, the Appellate Tribunal had directed the former promoters in accordance to the Supreme Court order to first clear out all dues pending in the name of the Essar Group, following which the Court will undertake further hearing of the case. The former parent group of Essar Steel has also instructed the promoters to return with a resolution plan for the debt-ridden Essar Steel.

The matter has been posted for further hearing on March 27.

Arcelor Mittal
Committee of Creditors (CoC)
Essar Steel
Insolvency and Bankruptcy Board
National Company Law Appellant Tribunal (NCLAT)

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