New Delhi: Arcelor Mittal’s take over of Essar Steel for Rs 42,000 crore has become imminent as the supreme court Friday set aside the National Company Law Appellate Tribunal (NCLAT) July 4 order giving equal status to financial creditors and operational creditors.
The apex court clarified that the clarified that financial creditors enjoy primacy over operational creditors and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.
The court’s judgement came on a petition of the committee of creditors (CoC) 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) had, however, given operational creditors equal status as lenders in the distribution of the ArcelorMittal’s bid amount among the creditors of Essar Steel.
A bench headed by Justice R F Nariman said that the adjudicating authority can send back the resolution plan to the committee of creditors (COC) for implementation in accordance with the guidelines but cannot change the commercial decision taken by the COC. The bench also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code.
The bench said it would be open for the the adjudicating authority to maintain the timeline in exceptional cases. The bench said that the COC resolution plan must balance the interest of all stakeholders.
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.
The Essar Steel has steel making business in Odisha. As a prelude to setting up a mega steel plant in the State, Essar Steel has set up a 6 mtpa pellet making unit at Paradip with a slurry pipeline infrastructure to transport iron ore fines from iron ore rich Keonjhar district of Odisha.
Arcelor Mittal, in fact, was in the process of setting up a green field mega steel plant of 12 million tonnes with an investment of Rs 50,000 crore in Patna tehsil of Keonjhar district, early this decade. However, it abandoned the plan as it’s attempt to get right over iron ore mines could not fructify.
