Insolvency issue: Essar invokes NCLT’s ‘spirit of IBC’ remark

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Published: January 4, 2019 3:14:44 AM

Since the resolution plan was submitted post expiry of the deadline, the lenders refused to consider it.

More than 90% of Essar Steel’s committee of creditors had voted in favour of the bid by Arcelor Mittal, which has promised Rs 39,500 crore by way of cash upfront.

A recent order by the Mumbai bench of the National Company Law Tribunal (NCLT) upholding the “spirit of the IBC Code” in a miscellaneous application in the ICICI Bank Vs Unimark Remedies is being seen by Essar Group as favourable to its stand in the matter relating to the resolution plan of the Essar Steel, which is currently before the Ahmedabad bench of the NCLT.
In its order on an application by Omkara Asset Reconstruction Pvt Ltd in the ongoing corporate resolution process of Unimark Remedies, initiated by ICICI Bank, the Mumbai bench of the NCLT observed that the “spirit of the Insolvency and Bankruptcy Code (IBC) came first in the scheme of things and rejection of a resolution plan by the lenders on technical grounds was against the law”.

The bench members, Bhaskara Pantula Mohan and V Nallasenapathy, then directed the resolution professional of Unimark Remedies to consider the resolution plan of the applicant, Omkara Asset Reconstruction Pvt Ltd, on its merits and accordingly take a decision that was “in the best interest of the parties concerned”.

The details of the case are as follows: Omkara Assets Reconstruction as a member of joint venture between Omkara Assets Reconstruction and Raju Chemicals had submitted its resolution plan on December 11, 2018, well after the committee of creditors’ (CoC) deadline of October 31, 2018.

Since the resolution plan was submitted post expiry of the deadline, the lenders refused to consider it.
Commenting on the order, an Essar Group spokesperson said, “The judgement will have an important and urgent bearing in the case of resolution proceedings in the case of Essar Steel, where the NCLT Ahmedabad is seized with similar circumstances”.

As is known, the case relating to the maintainability of Essar Steel promoters’ — the Ruias — last minute offer to pay Rs 54,389 crore for the control of the bankrupt company is currently before Ahmedabad NCLT and the next date of hearing is January 7.
In an earlier hearing on the matter, the counsel for the committee of creditors for Essar Steel had mentioned that the promoters of the company had not argued for reconsideration after the entity’s restructuring plan was rejected in July 2017, suggesting that the petition by Essar Steel Asia Holding seeking consideration of the resolution proposal of the Ruias was merely an attempt to delay the possible execution of the resolution plan submitted by ArcelorMittal.

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More than 90% of Essar Steel’s committee of creditors had voted in favour of the bid by Arcelor Mittal, which has promised Rs 39,500 crore by way of cash upfront. The plan is awaiting approval from the NCLT for execution.

A day after the approval by the CoC, Essar Steel promoters offered to pay Rs 54,389 crore towards the full settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of Essar Steel. The package included an upfront cash payment of Rs 47,507 crore to all creditors, including a payment of Rs 45,559 crore to the senior secured financial creditors.

As many as 31 operational creditors of Essar Steel moved the NCLT in five separate petitions urging that it direct the CoC to ensure full payment to them and take necessary steps to modify ArcelorMittal’s resolution plan for that. Alternatively, they urged the tribunal to direct the CoC to also consider the last minute offer of the Essar Steel promoters which promises to pay all creditors in full.

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