Operational creditors move NCLT against ArcelorMittal takeover of Essar Steel
28 operational creditors approached the bankruptcy court claiming settlement of their dues of over 380 crore
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Ahmedabad: ArcelorMittal’s move to buy Essar Steel faces yet another challenge with operational creditors approaching the National Company Law Tribunal, Ahmedabad bench, for being ignored in Arcelor’s bid that has been accepted by the committee of creditors (CoC).
After unsecured creditors, including Standard Chartered Bank and Deutsche Bank, challenged ArcelorMittal’s bid last month in the Essar Steel insolvency case, as many as 28 operational creditors on Tuesday approached the bankruptcy court claiming settlement of their dues of over ₹ 380 crore.
A clutch of 27 operational creditors, including Sakar Industries Private Ltd, Apex Commodities, Kamaljeet Singh Ahluwalia, Ideal Movers Private Ltd and Arfin India Limited, today filed a joint petition in the bankruptcy court seeking settlement of over ₹ 360 crore of dues.
Orissa Stevedores Ltd on Tuesday filed a separate interlocutory application in the NCLT, Ahmedabad, against resolution professional Satish Kumar Gupta and State Bank of India. The company said in its petition its dues to Essar Steel amounted to ₹ 20 crore.
“The present application is filed taking into consideration that the CoC, which consists of financial creditors, has not considered the financial recovery of the operational creditors of Essar Steel India Ltd while considering the settlement proposal and also while considering the resolution plan submitted by ArcelorMittal," Orissa Stevedores said in its application.
Both applications have sought the tribunal’s intervention in considering the settlement plan offered by the promoters of Essar Steel.
The resolution plan of ArcelorMittal provides no payment to operational creditors whose outstanding dues are over ₹ 1 crore, according to the joint application by the 27 operational creditors.
“We have followed the IBC process in good faith since first submitting our EOI last year. We are confident that the process will be implemented correctly and according to the law, which does not allow for offers outside the process after EOIs (expression of interest) have been submitted," ArcelorMittal spokesperson said on Tuesday.
Representative of Essar Steel when contacted, declined to comment on the matter.
Mint has reviewed copies of both the petitions. The petitioners have prayed before the NCLT seeking full payment of their dues or equitable payment as operational creditors on a par with the financial creditors.
One more application by an operational creditor whose outstanding dues are about ₹ 225 crore is also expected to be placed in the NCLT this week, according to a legal expert in the know of the development.
“In all, the total dues of operational creditors would be about ₹ 600 crore," he added.
The resolution plan by ArcelorMittal envisages upfront payment of ₹ 42,000 crore to lenders and an additional ₹ 8,000 crore towards capital expenditure. The total admitted claims of operational creditors totals ₹ 4,995 crore. ArcelorMittal has offered to settle this for ₹ 214 crore.
According to details available on the website of Essar Steel, these claims of operational creditors are verified by the resolution professional and admitted as dues payable to these creditors.
On 25 October, more than 92% of creditors of Essar Steel voted in favour of handing over the debt-laden company to ArcelorMittal. The resolution professional on 30 October filed ArcelorMittal’s plan with the NCLT, Ahmedabad, for approval.
According to the Insolvency and Bankruptcy Code, secured financial creditors will receive the highest priority, followed by unsecured financial creditors. If any amount is left over, it will accrue to operational creditors.
The operational creditors primarily comprise raw material suppliers like ferro alloys, iron ore and fines, paints, logistics and service providers among others.
The promoters of Essar Steel, the Ruia family, submitted a proposal to the CoC on 25 October agreeing to pay a total of ₹ 54,389 crore to all creditors.
Essar Steel is an integrated steel producer with an annual production capacity of 10 million tonnes. The facility comprises ore beneficiation, pellet-making, iron-making, steel-making, and downstream facilities, including cold rolling mill and galvanising. Located at Hazira in Gujarat, the facility also includes a power plant and a port that can handle 30 million tonnes of cargo annually.
In the last week of October, Standard Chartered Plc also approached the NCLT as dissenting financial creditor so that it could be heard before the tribunal decides on ArcelorMittal’s bid. Essar Steel owes more than ₹ 3,400 crore to Standard Chartered.
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