NCLT dismisses Essar Steel promoters’ plea for settlement plan

The Ruias requested the withdrawal of the petition under Article 12A of the Insolvency and Bankruptcy Code (IBC) which allows the withdrawal of the insolvency proceedings subject to the approval of 90% of the creditors and the National Company Law Tribunal (NCLT). Their offer came on a day when more than 92% of Essar Steel’s creditors voted in favor of selling the company to ArcelorMittal Netherlands BV.

The NCLT decision paves the way for ArcelorMittal to move closer to its plans to acquire Essar Steel.

The ESAHL-backed Ruia family, which owns 72% of Essar Steel’s shares, approached NCLT Ahmedabad last year with a proposal to settle all of the debt for about ?? 54,389 crores. ESAHL had challenged the resolution professional and CoC’s decision to accept ArcelorMittal’s resolution plan for Essar Steel, where the resolution process under the Indian Bankruptcy Code was initiated.

A bench of justice made up of two members Harihar Prakash Chaturvedi and Judge Manorama Kumari today declared that ESAHL’s plea was “unsustainable”.

“There is no irregularity in RP and CoC’s decision to reject the ESAHL settlement plan,” Chaturvedi said as he read the order.

Financial creditors voted in favor of ArcelorMittal’s resolution plan on October 25. Essar Steel shareholders then offered to pay all of its lenders in full, including operational lenders.

ArcelorMittal’s resolution plan provides for an upfront payment of ?? 42,000 crore to lenders and another ?? 8,000 crore towards capital expenditure.

The court said that once the insolvency process has started, the only way to withdraw a resolution plan is to get approval from CoC and IP.

The court cited the recent Supreme Court order in the Essar Steel case for not agreeing to the settlement plan of the Essar Steel promoters.

The request by Essar Steel shareholders was in violation of Article 12 (a) of the IBC, the court said.

Article 12A stipulates that any withdrawal request must be submitted before the issuance of the call for expressions of interest and must be accepted by 90% of creditors.

In October last year, the Supreme Court allowed ArcelorMittal and Numetal to bid for the bankruptcy of Essar Steel on the condition that they pay the contributions of defaulters linked to them within two weeks.

The CdC was due to decide on the best bid in eight weeks after also considering the proposal from the Vedanta Group, the third bidder, the Supreme Court said.

A handful of operational creditors and shareholders of Essar Steel have challenged CoC and RP’s decision to accept ArcelorMittal’s resolution plan. Standard Chartered Plc has also approached the NCLT as a dissenting financial creditor so that it can be heard before the court rules on ArcelorMittal’s offer. The hearing on their pleas will take place shortly.

“We welcome today’s ruling by the NCLT which protects the integrity of the IBC and ensures its legitimacy as a rules-based law. This is a positive development for Essar Steel India and the country in general. We now hope for a quick resolution of this problem. case, ”ArcelorMittal said in a press release.

On October 25, more than 92% of Essar Steel’s creditors voted in favor of selling the indebted company to ArcelorMittal after settling the arrears of Uttam Galva and KSS Petron.

“We continue to believe that our offer of ??54,389 crore is the most compelling proposition available to the creditors of Essar Steel. It seeks to repay all categories of creditors and fulfills the IBC’s overarching goal of maximizing value that has been established time and time again by courts at all levels. We submitted the proposal under the recently introduced Article 12A of the IBC and the recent Supreme Court ruling established that the provisions of the article are applicable retroactively, ”said the spokesperson for the Essar group in a statement.

We are awaiting a copy of the entire NCLT order and will take an appeal for next steps once we have carefully reviewed its contents, the official said.