Blow for Ruias: NCLT rejects plea challenging Essar Steel sale to ArcelorMittal-08.07.2019

The National Company Law Appellate Tribunal (NCLAT) has rejected promoter Prashant Ruia’s appeal against Essar Steel’s sale to ArcelorMittal, paving the way for the takeover of the debt-crippled steel major.

NCLAT said the issue has been decided by the Supreme Court and that the Committee of Creditors has no role in the distribution of the settlement amount.

The Lakshmi Mittal-led ArcelorMittal’s Rs 42,000 crore resolution plan for Essar Steel was approved by NCLT on March 8. The tribunal had observed that though it did not want to change the resolution plan approved by the committee of creditors, and it would suggest the lender reconsider the distribution of dues and give 15 percent of the total offer to operational creditors.

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    So now the fight is going for distribution of money among Operational Creditors and Financials Creditors.

    The lenders are unhappy with the tribunal ruling that operational creditors should be treated at par with financial creditors at the time of settling claims. The Ruias, the original promoters of Essar Steel, has been trying to regain control of the asset, so appealing against the NCLAT decision that went in favor of ArcelorMittal’s bid is the next logical move.

    Operational Creditors: This is the amount to be paid for Goods, Service, Employee dues and Govt. Dues.

    Financial Creditors: They are a bank or NBFC who has given loans to Essar Steel. As per rule during insolvency, they are the first to get their money and then rest other comes second to them.

    On July 4, the appellate tribunal held that the committee of creditors (CoC) had “no role to play in the matter of distribution of amount among the creditors, including the ‘financial creditors’ or the ‘operational creditors.” Essar Steel owes a total of Rs 69,192 crore to financial and operational creditors. As per the NCLAT decision, financial creditors will get 60.7 percent of their dues, while operational creditors with claims over Rs 1 crore will get 59.6 percent. Creditors with claims of up over Rs 1 crore will get 59.6 percent. Creditors with claims of up to Rs 1crore will be paid in full.

    Source: Economics Times