HEADLINES:
November 21 2019
Essar Steel: NCLT junks Ruia plea
30 January 2019

Withdrawal of insolvency proceedings should be sought by the initiator: tribunal

In a setback to the Ruia brothers, who are making last-ditch efforts to retain Essar Steel, which is under insolvency, the Ahmedabad bench of the National Company Law Tribunal (NCLT) on Tuesday rejected their proposal to repay the debt.

The tribunal pointed out that an application for withdrawal of insolvency proceedings under Section 12A of the Insolvency and Bankruptcy Code, 2016 can be considered only if it was filed by the applicant who initiated insolvency in the first place. In the Essar Steel matter, lenders State Bank of India and Standard Chartered Bank filed the insolvency cases, which means they are the applicants.

The bench also held that that there was no illegality on the lenders’ side for not accepting Essar Steel promoters’ plan. Having rejected the settlement proposal floated by the promoter family on the same day as the Committee of Creditors (CoC) approved the resolution plan submitted by ArcelorMittal, the bench will now conduct hearing on the resolution plan of ArcelorMittal.

CoC decision upheld

According to Satish Kumar Gupta of Alvarez & Marsal, Essar Steel’s resolution professional, the tribunal has, in effect, upheld the decision taken by the CoC. Last week, the NCLAT had asked the NCLT Ahmedabad bench to decide on the proposal of Essar Steel’s financial creditors to give ArcelorMittal the control of the company.

It may be noted that the ArcelorMittal group offered to pay creditors ₹42,000 crore to take over Essar Steel which faces insolvency proceedings to recover ₹50,800 crore of unpaid loans.

The Committee of Essar Steel creditors approved the proposal, ignoring a last-minute offer by the shareholders of Essar Steel to pay dues of ₹54,389 crore to both financial and operational creditors.

Reacting to Tuesday’s order, an Essar spokesperson said: “We continue to believe that our offer of ₹54,389 crore is the most compelling proposal available to Essar Steel creditors. We submitted the proposal under the recently introduced Section 12A of the IBC, and the recent judgement of the Supreme Court has established that the Section’s provisions are applicable retrospectively. We are awaiting a copy of the full NCLT order, and will take a call on next steps after we have thoroughly gone through the contents.”

“This [order] is a positive development for both Essar Steel India and the country. We now hope for a swift resolution to this case,” ArcelorMittal said in a statement.

 

 

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