NEW DELHI: IN a major relief to secured financial creditors, the Supreme Court has ordered maintenance of “status quo” on the NCLAT ruling in the Essar Steel insolvency case.
Hearing an appeal by secured financial creditors on Monday, a bench headed by Justice R F Nariman said it would hear the Essar Steel insolvency case in detail and posted the matter for the next hearing on August 7.
On July 4, the NCLAT, through its judgement, had clubbed all types of creditors together and changed the way proceeds from the sale of assets should be distributed.
The appellate tribunal held that the committee of creditors comprising financial creditors could not be allowed to negotiate the deal with the bidders and decide on distribution of claims as it would lead to conflict of interest.
The NCLAT had said that all operational and financial creditors with claims above Rs 1 crore would get about 60 per cent of their claim while creditors with claims of less than Rs 1 crore will receive their dues in full.
The judgement passed by NCLAT also enhanced the operational creditors’ dues to Rs 19,719 crore from Rs 5,074 crore by including claims of Dakshin Gujarat, Gujarat Energy, BPCL, IOCL, GAIL, ONGC and NTPC.
The ruling had upset the secured financial creditors as their share of debt recovery from Essar Steel insolvency would go down to Rs 30,030 crore against their approved claim of Rs 49,473 crore. This will lead to a haircut of 40 per cent against less than 20 per cent as per the resolution plan.
Lakshmi Mittal-led ArcelorMittal has been fighting for control of Essar Steel for more than two years.
The case has seen many twists and turns, including a settlement plan of Rs 54,389 crore made by Essar Steel promoters, who offered to pay off the entire debt. The plan was rejected by the National Company Law Tribunal.