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NCLAT okays Arcelor's purchase of Essar Steel

NCLAT okays Arcelors purchase of Essar Steel

New Delhi: The National Company Law Appellate Tribunal Monday gave a conditional go-ahead to a Rs 42,000 crore offer by world's largest steelmaker ArcelorMittal to buy Essar Steel, taking the billionaire Lakshmi Mittal closer to his dream of opening a shop in his home country.

A two-member bench headed by Justice S J Mukhopadhaya said the acceptance of the resolution plan submitted by ArcelorMittal and partner Nippon Steel & Sumitomo Metal Corp will be subject to its final order in the appeal filed by the promoters of debt-laden Essar Steel against the move.

It also said there is no stay on disbursal of the funds among financial and operational creditors of Essar Steel, which was auctioned to recover unpaid bank loans.

This came almost 20 months after the insolvency petition against Essar Steel was admitted by the Ahmedabad-bench of NCLT on August 2, 2017, and the entire process has been tied up in legal wrangles as the promoters used every legal forum available to challenge the process.

It wasn't immediately clear if Essar Steel promoters will choose to appeal against the National Company Law Appellate Tribunal (NCLAT) verdict in the Supreme Court.

Essar Steel will give Mittal a chance to enter the Indian steel market after previous attempts to set up mills in the country failed to materialise.

Lenders to Essar Steel had in October approved Arcelor-Nippon's offer to pay Rs 42,000 crore in an upfront cash payment to the creditors and a further Rs 8,000 crore in capital infusion in the 10 million tonnes steel mill - the largest steel asset on the block under the bankruptcy law. In doing so, they ignored a last-minute offer by the promoter Ruia family to pay Rs 54,389 crore to clear 100 per cent outstanding of both financial and operational creditors of Essar Steel. The plan was late last month approved by the bankruptcy court.

Arcelor's plan faced opposition from operational creditors who were getting just 4 per cent out of the total receipt.

Both operational creditors and Essar Steel promoters challenged the approval of the Ahmedabad-bench of the National Company Law Tribunal (NCLT) to Arcelor plan in NCLAT.

The NCLAT bench said the resolution professional of the company can disburse the funds between the financial creditors and the operational creditors as per resolution plan submitted by it.

"The resolution professional will be the chairperson of the monitoring committee and will act in accordance with law to ensure that the company is a going concern," the tribunal said.

Standard Chartered, an operational creditor and some others objected to lesser payment to them under the resolution plan submitted by ArcelorMittal.

On this, the NCLAT Chairman said: "Pehle Laxmi ko aane dijiye (Let the money come first)".

He assured them of a proper hearing on the issue and said it will look into the issue of discriminatory distribution of the funds between financial and operational creditors as per its previous order passed in the Binani Cement matter.

"Right now, you are getting Rs 60 crore. If you are entitled then you would even get more than that. If less, then you would have to refund," the bench said.

The NCLAT has directed to list the matter on March 27 for next hearing.

ArcelorMittal's resolution proposal involves financial creditors getting Rs 41,987 crore out of their total dues of Rs 49,395 crore. Operational creditors, under the plan, would get just Rs 214 crore against the outstanding of Rs 4,976 crore.

Last week, NCLAT had suggested that all operational creditors below Rs 1 crore should get 100 per cent of the dues and so should the employees of Essar Steel. Only 90 per cent of Rs 42,000 crore should be allowed for financial creditors.

The appellate tribunal also said it will look into the issue of discriminatory distribution of the funds between financial and operational creditors. It has asked the Insolvency & Bankruptcy Board of India (IBBI) to submit a ratio of distribution of funds between financial and operational creditors.

PTI

PTI

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