SC puts on hold ArcelorMittal's payment for Essar Steel

Last Updated: Sat, Apr 13, 2019 12:24 hrs
Employees walk past an Essar Group logo outside their headquarters in Mumbai

New Delhi: The long-drawn resolution process of Essar Steel has hit yet another roadblock with the Supreme Court on Friday stopping ArcelorMittal from making payment to lenders to buy the insolvent steel entity, thereby stretching billionaire Lakshmi Mittal's wait to have a foothold in his home country.

World's largest steel maker emerged as the successful resolution applicant for Essar Steel following its Rs 42,000-crore bid. But the going has not been smooth ever since July 2017 when Essar Steel was referred to bankruptcy court. The resolution continues to face several challenges in the National Company Law Appellate Tribunal (NCLAT).

The Supreme Court's two-judge bench headed by Justice Rohinton F. Nariman on Friday ordered that status quo be maintained regarding Arcelor's plan to buy Essar Steel. The court also directed the NCLAT to expeditiously decide on appeals in the case.

The NCLAT on Tuesday asked the NRI billionaire Mittal-led firm to be ready for upfront payment of the promised amount without any further procrastination. It also hinted that it might ask ArcelorMittal to deposit the money with an escrow account of either the insolvency court (NCLT) or the appellate tribunal itself in the next hearing, scheduled on April 23.

But with Friday's apex court's order, the NCLAT would first have to dispose of all the appeals related to Essar Steel resolution before it could ask ArcelorMittal to pay the bid amount to lenders.

One of the challenges to Essar Steel resolution is coming from Standard Chartered Bank that last month moved the NCLAT against insufficient payout of its dues.

Under the Essar Steel resolution, StanChart gets only 1.7 per cent of its total dues to the insolvent steel maker, while other financial creditors, which are part of the CoC, are receiving over 85 per cent of their dues.

The State Bank of India (SBI) has also opposed NCLAT's recommendation to give StanChart a higher amount than what lenders had agreed to earlier. It has said that the private bank is not a secured creditor and thus not eligible to make any additional claim.

ArcelorMittal's resolution proposal provides financial creditors 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.

Hearing multiple petitions filed by operational creditors, the Gujarat state tax department and others, the NCLAT bench on Tuesday also directed the financial and operational creditors to Essar Steel to file within a week a one-page affidavit each giving details of their claims admitted by resolution professional and those approved by the CoC. It also asked the Gujarat tax department to file an affidavit over its claims.