Now Axis Bank too, protest, NCLAT order on Essar Steel

By: |
Published: July 11, 2019 10:10:08 PM

The appellate tribunal said secured creditors would get only 60.7 percent of their Rs 49,473 crore claims as it ordered the rest of the money to be paid to operational creditors, treating them at par with the financial creditors.

Axis Bank, too protest, NCLAT, Essar Steel, State Bank, State Bank of india,NCLAT essar steel, NCLAT ordersChaudhry said the banks will exercise their right of taking the matter to the Supreme Court and hoped clarity can emerge in the matter from the apex court. (Reuters)

Private sector lender Axis Bank also joined State Bank by going public with its displeasure on the recent NCLAT judgement putting secured creditors at par with the operational creditors. SBI chairman Rajnish Kumar had Wednesday gone public with his anguish on the same order of the National Company Law Appellate Tribunal (NCLAT) awarding higher payout to Essar Steel’s operational creditors and treating them on par with secured lenders and said the banks would challenge the order at the Supreme Court.

“The NCLAT order does beg the question if this is how the proceeds will be shared, then secured creditors will ask why is the need to go to the IBC and not wait for liquidation,” Axis Banks managing director and chief Amitabh Chaudhry told reporters. He said it is still unclear on what is the formula which was adopted by the NCLAT while approving ArcelorMittal’s Rs 42,000-crore bid for the bankrupt flagship company of the Ruias-led Essar Group, which gave operational creditors equal status as the secured lenders.

Chaudhry said the banks will exercise their right of taking the matter to the Supreme Court and hoped clarity can emerge in the matter from the apex court. The appellate tribunal said secured creditors would get only 60.7 percent of their Rs 49,473 crore claims as it ordered the rest of the money to be paid to operational creditors, treating them at par with the financial creditors.

Read| US India bilateral trade could reach USD 238 billion by 2025

“What has happened here is that secured, unsecured and operational creditors have been ranked equal,” Axis Bank’s chief of corporate lending Rajiv Anand said. Drawing from the statutes, including the provisions in the Companies Act, SBI’s Kumar had pointed out that there was a distinction between secured and operational creditors, and that the former had a greater right on an asset at par with the employees of company facing bankruptcy resolution.

“If secured creditors are given the same treatment as operational creditors, then it is a huge disincentive for secured creditors and an incentive for operational creditors,” Kumar had said. He also warned that with this ruling, bankers would be hesitant to use the IBC provisions for resolving bad assets till such a time that the principles of the law were clearly laid out and hoped that the Supreme Court would clarify the same once they challenge the Essar Steel order by the NCLAT.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

FinancialExpress_1x1_Imp_Desktop