NCLT Ahmedabad to take decision on Essar Steel Insolvency case by 31 Jan'19?

As per the latest updates, The National Company Law Appellate Tribunal (NCLAT) has directed the Ahmedabad bench of NCLT to pass an order on the insolvency resolution plan submitted by Essar Steel RP (Resolution Professional), in which ArcelorMittal emerged as the highest bidder.

NCLAT has also clearly mentioned that in case Ahmedabad bench of NCLT does not pass any order by 31 Jan'19, then it would call the matter and pass an order accordingly on the next date of hearing most probably by 4 Feb'19.

The appellate tribunal was hearing an application filed by the CoC seeking an early decision. Along with this, ArcelorMittal has also moved to NCLAT to expedite the hearing on the auction of Essar Steel. The LN Mittal company, whose bid has got the backing of Essar Steel lenders, is in a race with the Ruias, who made a last minute offer for their insolvent steel company.

The Ahmedabad bench of NCLT is hearing cases, including the one pertaining to the maintainability of the bid given by the Ruias company, Essar Steel Asia Holdings. The NCLT also needs to give its stamp to the INR 42,000-crore proposal from ArcelorMittal. The bid has been cleared from the bankers and needs approval from the Tribunal.

Ruias made a last minute offer in October 2018 of INR 54,389 crore to retain the flagship Essar Steel within the family even after CoC approved ArcelorMittal's bid for of INR 42,000 crore and INR 8,000 crore to be infused as working capital in Essar Steel.

Essar Steel has issued a statement today that "The proposal made by Essar Steel shareholders provides for payment of a total of INR 54,389 crores to various creditors, which exceeds the resolution plan currently approved by the creditors by more than INR 12,000 crores. This proposal has been submitted 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.

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. 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. There is no requirement to provide any such details to a resolution applicant. It is therefore surprising to note comments made to the media by a resolution applicant regarding them not having received the details of the proposal.

The overriding objective of the IBC is the maximization of recovery for creditors and this has been established time and again by courts at all levels. Creditors of Essar Steel, including operational creditors, should not be forced to accept a resolution plan which undervalues the company and its assets."

Essar Steel, which runs a 10-million-tonne steel mill in Gujarat, owes more than INR 49,000 crore to over two dozen banks led by SBI and has been under bankruptcy proceedings. A few days back its lead lender SBI has decided to sell its loans in Essar Steel as it could see a spurt in provisioning for bad loans and erosion in capital base if the steelmakers insolvency process gets delayed further. However, this will not stall the company's IBC process.