SC allows ArcelorMittal to participate in mining block auction in Odisha

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New Delhi | Published: November 15, 2019 4:03:12 AM

The Supreme Court on Thursday allowed ArcelorMittal, the successful bidder for the takeover of debt-laden Essar Steel, to participate in the auction for grant of a mining block in Odisha.

Senior counsel NK Kaul and counsel Ruby Ahuja told the apex court that ArcelorMittal is not eligible under the captive category since its resolution plan for Essar is still sub judice.

The Supreme Court on Thursday allowed ArcelorMittal, the successful bidder for the takeover of debt-laden Essar Steel, to participate in the auction for grant of a mining block in Odisha.

A Bench led by Justice RF Nariman, while issuing notice to the Essar lenders and others, allowed ArcelorMittal to bid in the auction after the the Luxembourg-based steel giant had said only a bidder having a specified end-use plant is eligible to participate in the auction for allotment of a composite licence and mining lease for iron ore and maganese mineral blocks in Orissa.

Senior counsel NK Kaul and counsel Ruby Ahuja told the apex court that ArcelorMittal is not eligible under the captive category since its resolution plan for Essar is still sub judice. “While Arcelor (satisfying the minium net worth criterion) is presently ineligible to participate in the auction as it currently does not own a specified end-use plant. However, Essar Steel, which owns a pellet plant at Paradeep, Odisha, and the steel plant at Hazira, Gujrat, is not eligible to participate as it currently does not meet the net worth threshold,” the application filed by Arcelor stated.

Meanwhile, the Supreme Court will on Friday deliver a judgment on a batch of petitions against the National Company Law Appellate Tribunal’s (NCLAT) ruling that reduced the lender share of sale proceeds from 90% to 60% and also put the financial creditors and operational creditors at par in settlement of claims. While approving ArcelorMittal’s Rs 42,000-crore offer for Essar Steel, the NCLAT on July 4 had held that the creditors can only look at the viability of a resolution plan and have no role in deciding the distribution of funds. Besides, it also held that the operational creditors cannot be treated differentially.

As of now, the SC has asked the parties to maintain a status quo with regard to the acquisition of Essar Steel.

The lenders had stated that if they did not have the power to decide on the plans submitted by the bidders, it would effectively leave them “bereft of any role and authority inter alia in respect to approval of a resolution plan”.

ArcelorMittal has also challenged a part of the NCLAT order that ruled that the profit of Rs. 3,495 crore generated during the corporate insolvency resolution process cannot be given to it. The appellate tribunal had held the profit should be distributed among all the financial and operational creditors on a pro-rata basis of their claims.

According to the steel giant, the modified order has made it liable to pay an amount in excess of Rs. 42,000 crore provided for in its resolution plan. “If the order is read as compelling the appellant (ArcelorMittal) to pay Rs. 42,000 crore plus the difference between the value of the actual increased working capital and the assumed figure of Rs. 2,500 crore, then it would amount to a modification of its bid, which is not agreeable and thus would be illegal,” the petition stated.

The NCLAT had said that if ArcelorMittal does not pay the total dues to the creditors — financial creditors or operational creditors — “but pays lesser amount than the claim, then in such case, the profit should be distributed among all the creditors.”

The NCLAT had on July 4 modified a resolution plan cleared by the CoC, holding that the secured creditors including SBI, IDBI Bank and Canara Bank will get Rs. 30,030 crore or 60.7% of their Rs. 45,559-crore claims and the rest will go to operational creditors, treating them at par with the financial creditors. Operational creditors had made total claims of Rs. 19,719 crore and could get Rs. 11,969 crore or 59.6%, as per the NCLAT’s order.

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