NCLAT rejects Ruias' Plea that Challenged Arcelor Mittal's Bid for Essar Steel
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As per the latest reports, The National Company Law Appellate Tribunal (NCLAT) on July 4 has rejected the plea of the Ruia family that challenged the eligibility of ArcelorMittal's INR 42,000 crore bid for Essar Steel, thus clearing the hurdle in the Arcelor Mittal's way to take over Essar Steel.
On 8 March 2019, ArcelorMittal's INR 42,000 crore resolution plan for Essar Steel was approved by the NCLT. In its judgment, the NCLT had observed that though it did not want to change the resolution plan approved by the CoC, it would suggest the lender reconsider the distribution of dues and give 15% of the total offer to operational creditors.
However, this decision of NCLT was challenged by the original promoter of Essar Steel - Ruias citing ArcelorMittal's bid was invalid as its billionaire promoter Lakshmi Mittal hid his links with loan defaulting companies run by his brothers.
In April, the Supreme Court had halted distribution of funds among operational and financial creditors from the Luxembourg-based firm's INR 42,000-crore resolution plan for Essar Steel India. This was after the lenders to Essar Steel had challenged a direction of the NCLAT asking the resolution professional (RP) to call a fresh meeting of the committee to consider the redistribution of funds among the creditors.
The appellate tribunal had on 21 May heard the contentions of all the parties and reserved its judgment in the case. The distribution of amount for all operational and financial creditors will be reflected in ArcelorMittal's resolution plan and that the Committee of Creditors (CoC) will have no role in this distribution.
In today's judgment, the NCLAT has also revised the approved claims of operational creditors to INR 19,700 crore, up from INR 5,000 crore, stating that there was a large disparity in the claims and the data provided to the NCLAT. The total claims of financial, operational creditors now stand at INR 69,192 crore.
The Lakshmi Mittal-led company has been fighting for the control of Essar Steel for well over 600 days now. The case has seen many twists and turns, including a settlement plan of INR 54,389 crore made by the promoters of Essar Steel, who offered to pay off the entire debt. The plan was, however, rejected by the NCLT.
ArcelorMittal's bid, on the other hand, includes an upfront payment of INR 42,000 crore towards the debt resolution of Essar Steel, with an additional INR 8,000 crore of capital infusion into the company to support operational improvement, increase production levels, and deliver enhanced levels of profitability. In October 2018, the CoC of Essar Steel had voted to approve ArcelorMittal's plan and a letter of intent was issued.
