The Committee of Essar Steel Creditors chose this proposal ignoring a last-minute offer by the shareholders of Essar Steel to pay all dues of both financial and operational creditors.
Essar Steel Wednesday said the Rs 54,389-crore offer by its shareholders to pay all dues of financial and operational creditors of the company was much superior to a rival offer by ArcelorMittal and lenders should not be pressured into giving control of the company to any entity that undervalues it. The statement came on a day when the National Company Law Appellate Tribunal (NCLAT) asked the Ahmedabad-bench of the company law court to pass an order on the proposal of Essar Steel’s financial creditors to give ArcelorMittal control of the company, which they had auctioned to recover unpaid loans. ArcelorMittal had offered to pay creditors Rs 42,000 crore to takeover Essar Steel that faced insolvency proceedings to recover Rs 50,800 crore of unpaid loans.
The Committee of Essar Steel Creditors chose this proposal ignoring a last-minute offer by the shareholders of Essar Steel to pay all dues of both financial and operational creditors. “The proposal made by Essar Steel shareholders provides for payment of a total of Rs 54,389 crore to various creditors, which exceeds the resolution plan currently approved by the creditors by more than Rs 12,000 crore,” Essar Steel said in a statement. The proposal, it said, was submitted under the recently introduced Section 12A of the Insolvency and Bankruptcy Code (IBC).
“Under the proposal made by the shareholders, all classes of creditors would receive full recovery of their claims,” the statement said. “The overriding objective of the IBC is maximisation of recovery for creditors and this has been established time and again by courts at all levels. Creditors of Essar Steel, including operational creditors, should not be forced to accept a resolution plan which undervalues the company and its assets.”
The new Section 12A of the IBC, which was introduced last year, states that the Adjudicating Authority may allow the withdrawal of insolvency proceedings on an application made by the applicant with the approval of 90 per cent of the voting share of the Committee of Creditors. “Under the provisions of the IBC, a proposal made under Section 12A is to be decided between the creditors of Essar Steel and the company,” Essar Steel statement said.
“Creditors have already been provided all relevant information on the proposal. No request has been received from the committee of creditors of Essar Steel regarding any further information that they need in this regard.” Rejecting ArcelorMittal’s contention, it said there is no requirement to provide any details to a resolution applicant i.e. bidder. ArcelorMittal had on Tuesday stated that “there are certain parties in India who would like that the IBC not be implemented according to the law”.
“The IBC was introduced for a very serious reason – to address a major problem with bad loans. If the law is not implemented correctly and the rules are flouted, as suggested by some, this sends a negative signal about the certainty of India as an investment destination,” it had said.
“ArcelorMittal has followed the process from the start. We fully expect the process to continue to be implemented correctly and as per the law and that statements attempting to convince otherwise not be given any credibility.”