Mumbai: The National Company Law Appellate Tribunal (NCLAT) hearing the Essar Steel bankruptcy proceedings said it would decide on the powers of the Committee of Creditors (CoC).
The development came on Tuesday as senior advocate Kapil Sibal argued that "distribution of the financial package" arising from the sale of Orissa Slurry Pipeline Infrastructure (OSPIL) in the Essar Steel bankruptcy proceedings by the CoC "is illegal and discriminatory".
Sibal was arguing on behalf of Standard Chartered Bank during the hearing of Essar Steel bankruptcy proceeding in NCLAT. Standard Chartered Bank (SCB) is a financial creditor of Essar Steel (ESIL).
Sibal argued the "illegality resulted from secret negotiations between the core committee and AM (ArcelorMittal) India" and this was detrimental to all creditors.
He termed the secret settlement with the major lenders of OSPIL as a "scam". Standard Chartered Bank has alleged that the amount of Rs 2,500 crore should have been paid to it rather than getting diverted to lenders of OSPIL.
Subsequently, the bench observed that out of the 10 people, who are financial creditors of ESIL, five to six are lenders to OSPIL and wanted to know if Rs 2,500 crore would go only to these lenders.
Further, the bench said that it would decide on the power of CoC. Besides, Sibal said that the reduction in the upfront amount from Rs 42,000 crore to Rs 39,500 crore and the agreement to delegate the manner of distribution was evidently designed to prejudice the right of SCB.
He cited the letter of September 10, 2018 and a note dated September 25, 2018, wherein AM India had already decided the manner of distribution amongst secured financial creditors.