Legal complications continue to threaten the ongoing Essar Steel insolvency resolution process after Standard Chartered (StanChart) filed a petition with the National Company Law Tribunal (NCLT) late last week, seeking to ‘quash and set aside’ the committee of creditors (CoC) decision in favour of ArcelorMittal’s revised resolution proposal to acquire Essar Steel. According to StanChart’s petition, it has also sought the rejection of ArcelorMittal’s proposal by the tribunal.
In October, StanChart had filed a caveat to ensure that no decision is passed on ArcelorMittal’s resolution plan submitted by the CoC for the NCLT’s approval until StanChart is heard by the tribunal. As is known, over 90 per cent of the CoC had finally voted in favour of the revised bid by ArcelorMittal, which has promised Rs 39,500 crore cash upfront. The electronic vote was conducted over October 24 and October 25. Various senior bankers had indicated to FE that StanChart had voted against the Arcelor’s resolution plan.
Alternatively, the StanChart petition seeks distribution of Rs 42,000-crore among secured financial creditors on a pro-rata basis based on amount of admitted claims or principal amount along with directions that StanChart ‘receives its pro rata share of Rs 2,983.98 crore or at least Rs 2,646.05 crore (plus the applicant’s share of the closing adjustment)’. Classified as a secured financial creditor by resolution professional Satish Kumar Gupta, Rs 2,646.05 crore represents StanChart’s secured principal outstanding exposure to Essar Steel. According to its calculations, StanChart’s share as per the CoC-approved distribution would come to Rs 60.71 crore against admitted secured claims of Rs 3,487.10, coming to a recovery of 1.7 per cent against Rs 2,983.98 it would receive if the share was divided on a pro rata basis among secured lenders with a recovery of 85.6 per cent.
For the difference in the amount it would receive under the two scenarios, StanChart blamed the core committee formed from among members of the CoC, namely State Bank of India, ICICI Bank, IDBI Bank, Edelweiss Asset Reconstruction Company, in March. This core committee was initially meant to represent the Essar Steel CoC at court proceedings, but which was later entrusted with several other functions. StanChart presents an argument in its application citing ‘discriminatory practice’ of the CoC, and terms the core committee’s negotiation with ArcelorMittal just before the revised plan is put to a final vote , following approval of the same by the CoC, as illegal.
SBI had referred Essar Steel to the NCLT seeking a resolution via the corporate insolvency resolution process under the IBC. Essar Steel owes lenders about Rs 49,000 crore. FE