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Top Court Allows ArcelorMittal To Complete Deal To Acquire Essar Steel

Top Court Allows ArcelorMittal To Complete Deal To Acquire Essar Steel

The Supreme Court on Friday set aside the National Company Law Appellate Tribunal (NCLAT)'s order, allowing steel giant ArcelorMittal to complete its purchase of debt-laden Essar Steel. The order order came as a huge win for lenders who had challenged the bankruptcy appellate tribunal's order which had given financial and operational creditors equal right over the sale proceeds. State-run banks are primary financial creditors of Essar Steel while its operational creditors are vendors and suppliers.

The bench clarified that financial creditors enjoy primacy and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.

"No doubt the ultimate discretion on distribution is with the Committee of Creditors (CoC), whose decision should balance the interests of all stakeholders," the bench said.

Essar Steel is under a debt of Rs. 30,030 crore to financial creditors and Rs. 11,969 crore to operational creditors. State-run banks are primary financial creditors of Essar Steel while its operational creditors are vendors and suppliers.

Essar Steel was among the twelve large steel and other infrastructure companies which defaulted and were referred to the bankruptcy court in 2017.

The acquisition of Essar Steel India will make ArcelorMittal the fourth-biggest producer in the country.

The top court also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code.

An amendment to the Insolvency and Bankruptcy Code earlier this year gave the Committee of Creditors (CoC) explicit authority over the distribution of proceeds in the resolution process and fixes a firm timeline of 330 days for resolving cases referred to the IBC.

In its July 4 order, the NCLAT had said that financial creditors will get 60.7 per cent of their admitted claims of Rs 49,473 crore, almost same as operational creditors.

The operational creditors with admitted claim amount of less than Rs 1 crore would get 100 per cent, while above Rs 1 crore would get 60.26 per cent and workmen and employees would get 100 per cent.

ArcelorMittal had told the NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring Essar Steel under the insolvency process.

The NCLAT cannot interfere with the commercial decisions taken by the COC, the top court said.

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