The National Company Law Appellate Tribunal has directed Essar Steel’s resolution professional to call a meeting of the Committee of Creditors and work out the distribution of the Rs 42,000 crore offered by Arcelor-Mittal in line with the decision of the Ahmedabad bench of the National Company Law Tribunal.
The NCLAT clarified that it had not stayed the order of the Ahmedabad bench of the NCLT and that the resolution professional could continue with the process of fund distribution.
The NCLT, while approving ArcelorMittal’s resolution plan, suggested distributing 85% of its offer to financial creditors on a pro-rata basis and the remainder to operational creditors.
“Let it be clear, we have not stayed the impugned order and the resolution plan,” said the two-member NCLAT bench led by Justice SJ Mukhopadhaya. “The observations and directions of the adjudicating authority having not been stayed. The plan has to be given effect by the direction of the adjudicating authority.”
The NCLAT has previously stated that the distribution of funds to lenders will be subject to its final decision. Lenders may have to refund part of the payments they receive if the NCLAT modifies a distribution plan approved by the CoC.
The NCLAT was hearing an application by Standard Chartered, which holds a corporate guarantee of Rs 3,487 crore issued by Essar Steel for a loan to Essar Steel Offshore (ESOL). Standard Chartered had appealed against the distribution plan agreed upon by the CoC, calling it “discriminatory” and the process it followed “contrary to the law.”
Standard Chartered is entitled to receive only Rs 60.7 crore, or 1.7% of its dues, under the distribution plan approved by the CoC, while other financial creditors are set to get about 92% of their dues.
The CoC has previously submitted to the Ahmedabad bench of the NCLT that this distribution was fair as the only security held by Standard Chartered were shares of ESOL, which had declined in value to Rs 24 crore, while other secured financial lenders had claims against the assets of the corporate debtor Essar Steel India.
If the CoC accepts the recommendation of the Ahmedabad bench of the NCLT, Standard Chartered along with other financial creditors would receive about 72% of their dues.
However, the total recovery for operational creditors is still not clear. While Rs 4,976 crore of their claims have been admitted, this number is expected to rise.
Essar Steel was one of the 12 large accounts referred for insolvency resolution by the Reserve Bank of India in June 2017, but the case has dragged on for almost 600 days against the mandated 270-day period because of repeated legal challenges.