Lenders, Essar’s Promoters Ruias All Set To Challenge NCLAT Order Which Went In Favor Of ArcelorMittal In Supreme Court

Bankers and Essar Steel’s owners, the Ruias plan to appeal against the decision by the National Company Law Appellate Tribunal’s (NCLAT) latest ruling in the Supreme Court.

The company’s lenders are unhappy with the tribunal ruling that operational creditors should be treated at par with financial creditors at the time of settling claims.

The latest NCLAT order has slashed their recoveries to Rs 30,000 crore or 60% of overall claims as against 89% earlier. Besides, the order seems to undermine the essence of the Insolvency and Bankruptcy Code (IBC), which gives financial creditors a superior claim in the recovery process, according to bankers.

The Ruias, the original promoters of Essar Steel, have been trying to regain control of the company and hence appealing against the NCLAT decision which had gone in favor of ArcelorMittal’s bid is the next logical move.

Earlier, on July 4, the NCLAT had held that the committee of creditors (CoC) had no role to play in the matter of distribution of the amount among creditors, including ‘financial creditors’ or ‘operational creditors’.

The NCLAT had held that the CoC could only look at the viability of a resolution plan and not the distribution of the amount. It had also said CoCs were not allowed to form subcommittees to negotiate with resolution applicants.

Incidentally, Essar Steel owes a total Rs 69,192 crore to financial and operational creditors. As per the NCLAT decision, financial creditors will get 60.7% of their dues, while operational creditors with claims over Rs 1 crore will get 59.6%, while creditors with claims of up to Rs 1 crore will be paid in full.