NCLT Ahmedabad has approved the ₹42,000 Resolution Plan of global steel magnate ArcellorMittal to take over the debt-ridden Essar Steel.
After a protracted legal battle and multiple litigations, the National Company Law Tribunal (NCLT) Ahmedabad approved ₹42,000 Resolution Plan of global steel magnate ArcellorMittal to take over the debt-ridden Essar Steel.
The tribunal’s approval for the mega deal has come almost 583 days after it began the insolvency proceedings, instead of the mandated 270 days.
It may be noted that the Essar Steel runs a 10-million-tonne steel mill at Hazira in Gujarat and owes over ₹49,000 crore to over two dozen banks led by the State-run State Bank of India, and has been under the bankruptcy proceedings since June 2017.
It was one of the 12 large accounts identified by the Reserve Bank of India (RBI) to take under bankruptcy proceedings to recover dues of banks and financial institutions.
With the NCLT’s verdict, original promoters of the Essar Steel, Shashi and Ravi Ruia have lost control of their once-blue chip steel-making factory in Gujarat.
Approval pending amidst litigations
Earlier in October 2018, ArcelorMittal’s takeover proposal for the indebted steel-maker was approved by the Essar Steel’s Committee of Creditors and since then it was pending before the NCLT for approval amidst several litigations, including the final litigation the Ruia brothers made to retain their family jewel.
However, while rejecting the Ruias’s offer, the NCLT had said that ₹54,389 crore offer by Essar Steel Asia Holding, which was much higher than the ArcelorMittal's ₹42,000 crore bid, was not maintainable as the only way to make a proposal is through Section 12A.
Also, the provisions of Insolvency and Bankruptcy Code (IBC) prevented the promoters from making the bid. Section 29A of the IBC, which bars promoters of a defaulting company from bidding in the insolvency process, meant the Ruias were not allowed to place a bid for the company.
On Friday, clearing the ArcelorMittal's bid, NCLT said it cannot impose judicial view over banks' wisdom. However, the tribunal bench asked the Committee of Creditors (CoC) to reconsider distribution of dues, suggesting that the lenders should consider giving 15% of total offer to operational creditors, who are not entitled to recover their dues under the resolution plan cleared by the CoC and endorsed by the Tribunal.
ArcelorMittal's resolution proposal also includes an additional ₹8,000 crore of capital injection into the company to improve operational efficiencies, increase production and deliver enhanced levels of profitability.
No comments:
Post a Comment