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In a major setback for the Ruia family, the promoters of insolvent Essar Steel, the National Company Law Tribunal’s (NCLT’s) Ahmedabad Bench on Tuesday rejected the plea of its majority shareholder, Essar Steel Asia Holding Ltd (ESAHL), to submit a settlement proposal.
In its order rejecting the interlocutory application (IA) 430 of ESAHL, the two-member Bench comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari held that as the holding company and majority shareholder, ESAHL did not have the locus standi to make a debt settlement proposal as it did not approach as a resolution applicant unlike others.
Essar is expected to challenge the decision in the appellate tribunal.
An Essar Steel spokesperson said, “we continue to believe that our offer of Rs 54,389 crore is the most compelling proposal available to Essar Steel creditors. It seeks to repay all classes of creditors and fulfils the IBC’s overriding objective of value maximisation that has been established time and again by courts at all levels."
"We submitted the proposal under the recently introduced Section 12A of the IBC (Insolvency and Bankruptcy Code) and the recent judgment of the Supreme Court has established that the section’s provisions are applied retrospectively. We are awaiting a copy of the full NCLT order, and will take a call on the next steps after we have thoroughly gone through the contents,” he added.
ArcelorMittal welcomed the judgment and said, “Today’s ruling protects the integrity of the IBC and ensures its legitimacy as a rules-based law. This is a positive development for both Essar Steel India and the country more broadly. We hope now for a swift resolution to this case.”
The NCLT bench observed, “We do not find any irregularity or illegality in the decision of the RP and CoC (the committee of creditors) in not considering the settlement plan (of ESAHL).”
It further observed that other than the resolution applicant i.e. ArcelorMittal, the resolution process “cannot be made open to another person to make an application under Section 60(5) of IBC”.
“IA 430 is rejected on the grounds that it is not maintainable before this adjudicating authority under 60(5) of the IBC,” the order read.
The Bench observed that the scope of the settlement proposal under Section 60(5) would not be proper when a specific provision under Section 12(A) of resolution plan had already been incorporated.