On Monday, the promoters of Essar Steel, the Ruias, appealed in the NCLAT (National Company Law Apellate Tribunal) against a January 29 decision by the Ahmedabad bench of NCLT (National Company Law Tribunal) which held that the Rs 54,389 crore resolution plan put forward by the Ruias was not maintainable. This bid had been made last October.
The Supreme Court (SC) has done well to dismiss the pleas of operational creditors of Essar Steel; it ruled on Monday that these were not valid. However, even with this, there is no guarantee a decision on the bankrupt steelmaker’s future will be arrived at soon. On Monday, the promoters of Essar Steel, the Ruias, appealed in the NCLAT (National Company Law Apellate Tribunal) against a January 29 decision by the Ahmedabad bench of NCLT (National Company Law Tribunal) which held that the Rs 54,389 crore resolution plan put forward by the Ruias was not maintainable. This bid had been made last October.
Indeed, the resolution of Essar Steel, under the CIRP (corporate insolvency resolution process) has taken way too long, more than 500 days since it was initiated. The average duration for resolution of cases solved till end-December 2018 was a fairly high 313 days. Even though the SC had asked the Ahmedabad bench of NCLT to deliver a verdict on Essar Steel by end-January, the several appeals—by operational creditors and now the promoters—are delaying the process. To be sure, the CIRP is in its early days and with precedents being set, the next lot of cases will see speedy resolutions. The law, too, must be amended if necessary to clearly state that promoters—or other applicants for that matter—cannot put in late bids. The Ruia bid was made after the CoC (Committee of Creditors) had approved the Arcelor Mittal proposal. Lenders to Bhushan Power and Steel (BPSL) had last Friday rejected a bid from the erstwhile promoters to repay the financial creditors. Even before this, the courts had allowed late bids for the company, after Tata Steel had been declared the preferred bidder.
Indeed, the Essar Steel delay has cost the banks dearly, with daily losses at about Rs 17 crore. The good news is that the SC has upheld the Insolvency and Bankruptcy Code (IBC) in its entirety, saying that a person unable to service the debt beyond the grace period is unfit to be eligible to become a resolution applicant. However, the process should not be torpedoed by promoters looking to regain control of their businesses. Indeed, there have been differences in the manner in which the judges have ruled and the sooner these decisions are standardised the better for the system. The NDA government has taken the initiative to help lenders recover their money and preserve costly assets. It is up to the judiciary to ensure that banks get back their money at the earliest.