ArcelorMittal, the world’s largest steelmaker, looks set to enter India with the National Company Law Tribunal (NCLT) on Friday clearing its Rs42,000-crore resolution plan for insolvent Essar Steel.
The decision, which comes after 583 days of the stressed assets of Essar Steel being referred for insolvency proceedings, is expected to put an end to the protracted battle for the stressed steel asset.
The resolution plan included an upfront payment of Rs42,000 crore and a post-deal infusion of Rs8,000 crore in Essar Steel. The decision, which paves the way for ArcelorMittal's entry into India, however, took more than the resolution period of 270 days prescribed by the Insolvency and Bankruptcy Code (IBC).
The Ahmedabad bench of the NCLT approved ArcelorMittal's resolution plan, which was voted as the winning bid in October 2018 by the Committee of Creditors (CoC). An award of the resolution plan was, however, delayed because of disputes between the bidders.
"We welcome today's pronouncement by the NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible," ArcelorMittal said in a statement after the verdict.
The National Company Law Appellate Tribunal (NCLAT) had last month given an 8 March deadline for NCLT Ahmedabad bench to take a final decision on ArcelorMittal's bid for the acquisition of Essar Steel.
While the NCLT decision comes as a big setback for the promoter group Ruias who had offered as much as Rs54,389 crore to retain control of the company, the promoters are still hopeful that the creditors would finally opt for their “superior” offer.
"We continue to believe that our settlement proposal of Rs 54,389 crore is the most compelling one available to Essar Steel creditors and fulfils the IBC's declared overriding objective of value maximisation, which has been established time and again by courts at all levels," an Essar spokesperson said after the judgment.
"We are also confident of the legal validity of our said offer made under Section 12A, which provides for the withdrawal from the IBC process by making full payment to the creditors. We are awaiting a copy of the NCLT order, and will take a call on next steps after examining the same," he added.
The NCLT Ahmedabad bench also dismissed the application filed by the suspended board of directors of Essar Steel to view the resolution plan, but said it cannot impose a judicial view over the banks' wisdom.
The NCLT bench, however, is learnt to have suggested to the financial creditors to forego some of its dues for the sake of operational creditors. It also suggested that the CoC may reconsider the distribution of dues and give 15 per cent of the total to operational creditors.
Essar Steel owes Rs49,000 crore to financial creditors alone.
Essar Steel is among the largest single location steel producers with a 10 million tonnes per annum liquid steel capacity. The integrated facilities comprise hot rolling facilities, cold rolling facilities, plate mill, among others located in Hazira, in the Gujarat coast.
The promoter group Ruias are decided to appeal in the NCLAT and if need be, may even approach the Supreme Court, although Essar's earlier appeals in the case had been dismissed both by the NCALT and the Supreme Court.