SC orders status quo in Essar insolvency case

SC orders status quo in Essar insolvency case

The Supreme Court Monday ordered status quo as of today in the Essar insolvency case. (Reuters Image for Representation)

The Supreme Court Monday ordered status quo as of today in the Essar insolvency case.

A bench headed by Justice R F Nariman said the monitoring committee will continue its work till the case is heard on August 7.

The bench was hearing a plea of the Committee of Creditors challenging NCLAT's order of July 4 in which it had approved steel tycoon Lakshmi Mittal-led ArcelorMittal's Rs 42,000 crore bid for the acquisition of Essar Steel after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.

The National Company Law Appellate Tribunal (NCLAT), however, gave operational creditors equal status as lenders in the distribution of the ArcelorMittal's bid amount among the creditors of Essar Steel.

Debt-laden Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.

In its July 4 order, the NCLAT had said that financial creditors will get 60.7 per cent of their admitted claims of Rs 49,473 crore while the rest would go to the operational creditors.

The operational creditors with admitted claim amount less than Rs one crore would get 100 per cent, while above one crore would get 60.26 per cent and workmen and employees would get 100 per cent.

The tribunal had said that the Committee of Essar Steel Creditors (CoC) will have no role in the distribution of Rs 42,000 crore and allowed claims of the operational creditors such as Dakshin Gujarat, Gujarat Energy, Bharat Petroleum, Indian Oil, GAIL, ONGC, and the NTPC.

ArcelorMittal had told the NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring Essar Steel under the insolvency process.

The tribunal had said that the apex court had settled the issue of eligibility of ArcelorMittal India and could not be re-opened before the Appellate Authority at a stage where the 'Resolution Plan' approval was being considered.

The Ahmedabad-bench of National Company Law Tribunal on March 8 approved the bid submitted by ArcelorMittal India for the takeover of Essar Steel.

Essar Steel director Prashant Ruia had challenged the order saying ArcelorMittal was ineligible to bid under Section 29A of the Insolvency and Bankruptcy Code as it was associated with delinquent or loan defaulting firms.

ArcelorMittal had claimed that Ruia's plea was one of the multiple mala fide attempts to derail the corporate insolvency resolution process.

The operational creditors had opposed ArcelorMittal's resolution plan saying they were getting notional payment while 92.5 per cent of the debt of financial creditors were being paid.

In its order, the NCLAT had said that the amount of profit generated by Essar Steel during the corporate insolvency resolution process (CIRP) cannot be given to the successful resolution applicant ArcelorMittal as it has not invested any money.