NEW DELHI: Steel magnate Lakshmi N Mittal’s wait for an entry to the Indian market has been delayed once again, after the Supreme Court on Friday stopped ArcelorMittal from making a payment to lenders to buy insolvent firm Essar Steel India. The SC ruling was in response to petitions filed by some banks, including Standard Chartered, which are locked in a fight over how the proceeds from Essar Steel’s sale must be distributed.
In March, the National Company Law Appellate Tribunal (NCLAT) had approved ArcelorMittal’s `42,000 takeover bid for Essar Steel. The NCLAT approval was in line with the order of the Ahmedabad bench of National Company Law Tribunal (NCLT). The NCLAT had, last month, directed ArcelorMittal to deposit the bid amount with the Committee of Creditors (CoC) of Essar Steel. However, how the money would be distributed among the lenders was still under dispute.
Four lenders with the largest exposure to Essar Steel, namely Edelweiss ARC, State Bank of India, IDBI Bank and ICICI Bank, are part of the CoC. Standard Chartered Bank, one of the unsecured lenders, which has an exposure of `3,500 crore, has been opposing the CoC-approved resolution plan, contending that it favoured the secured creditors.
Under the tribunal’s order, Standard Chartered was allotted only 1.7 per cent of the total admitted claims, while close to 92 per cent of the claims of financial creditors were being recovered. The NCLAT had ruled that the distribution should be done on a pro-rata basis, and Standard Chartered should be awarded its share accordingly. The CoC, however, moved Supreme Court opposing higher payment to Standard Chartered.
A bench led by Justice Rohinton F Nariman directed NCLT to expedite decision on appeals in the case.
This has temporarily halted resolution of the cash-strapped Essar Steel, which was one among the first 12 cases selected by the Reserve Bank of India for resolution under the Insolvency and Bankruptcy Code (IBC). It has been stuck in legal disputes for almost two years and has crossed the mandated 270-day period for resolution.
Meanwhile in NCLAT
Upholding the order of NCLT Ahmedabad bench, the NCLAT had in March directed ArcelorMittal to deposit the bid amount of I42,000 crore with the Committee of Creditors
Standard Chartered, an unsecured lender, who was allotted 1.7% of the total claims while financial creditors were given 92%, cried foul
The NCLAT ruled that the distribution should be done on a pro-rata basis
The CoC moved SC opposing higher payment to Standard Chartered