Ahmedabad/Mumbai: There is yet another spanner in the works for the Essar Steel Ltd insolvency resolution, with a Gujarat state utility challenging ArcelorMittal Netherlands BV’s rescue plan before the bankruptcy tribunal. Dakshin Gujarat Vij Co. Ltd (DGVCL) on Monday approached the dedicated bankruptcy court in Ahmedabad, opposing the resolution plan submitted by the resolution professional (RP). In its plea, DGVCL said its claim of 5,882 crore will stand extinguished if the tribunal approves the plan. It said the ArcelorMittal’s Essar Steel bid does not take into account contingent liabilities to debtors.

The move follows unsecured creditors like Standard Chartered Bank, Gujarat Energy Transmission Corp., GAIL (India) Ltd, and 30-odd operational creditors approaching the bankruptcy court to settle their dues.

“It is further learnt that all contingent liabilities of the corporate debtor up to the plan approved date arising out of any proceedings in which the corporate debtor is a party shall, unless otherwise stated in the resolution plan and irrespective of the final outcome of such proceedings, stand irrevocably and unconditionally reduced to and at the amounts that would be realizable if the contingent liability had fructified at any time prior to the plan approval date," according to DGVCL’s petition filed before the Ahmedabad bench of NCLT on Monday.

Mint has reviewed a copy of the petition.

The resolution plan by ArcelorMittal envisages upfront payment of 42,000 crore to lenders and an additional 8,000 crore towards capital expenditure.

Under the Insolvency and Bankruptcy Code, secured financial creditors will receive the highest priority, followed by unsecured financial creditors. If any amount is left out of the resolution amount, it will go to operational 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 NCLT Ahmedabad.

The ArcelorMittal resolution plan seeks directions to the effect that all non-compliance of Essar Steel till the date of approval of resolution plan shall be deemed to be waived by all government authorities.

According to the plan, ArcelorMittal and Essar Steel shall get a waiver from all actions, proceedings or penalties under applicable laws for an additional period of 12 months from the effective date for any non-compliance, said a senior lawyer who did not wish to be identified.

DGVCL said it has submitted its claim to the resolution professional as per the provisions of the Insolvency and Bankruptcy Code, 2016, and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The claim of the applicant, it said, was incorrectly determined by the interim resolution professional at Rs1.

DGVCL had approached NCLT Ahmedabad by filing an interlocutory application earlier this year, challenging the claim amount. The petition is still pending.

Of the claims of 5,882 crore, DGVCL said 1,136 crore were towards cross-subsidy surcharge, 666 crore towards additional surcharge and 4,047.01 crore were for breach of minutes of meeting dated 1/2/2010.

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. Located at Hazira in Gujarat, the facility also includes a power plant and a port that can handle 30 million tonnes of cargo annually.

ArcelorMittal’s resolution plan for Essar Steel submitted by the resolution professional to NCLT says that “the payments contemplated in the plan shall be the corporate debtor’s full and final performance, and satisfaction, of all claims (including rejected claim amount and verification pending amounts) against the corporate debtor as of the insolvency commencement date and proceedings for any security interest, shall stand irrevocably and unconditionally settled and extinguished on the plan approval date".

Mint has reviewed a copy of the plan.

“We have followed the IBC process in good faith since first submitting our EOI in 2017. The committee of creditors has clearly decided ArcelorMittal’s plan is in the best interests of Essar Steel and we are confident that the process will be implemented correctly and according to the law," a spokesperson of ArcelorMittal said in response to an emailed query.

“Under the provisions of the IBC, admission of claims of operational creditors and dealing with the same is the responsibility of the Resolution Professional and the Committee of Creditors and the erstwhile promoters have no role in the same. Arcelor Mittal’s resolution plan does not appropriately address the issues of all stakeholders. Promoters and Shareholders of Essar Steel have submitted a settlement plan which not only offers substantially higher recovery to the lenders but also fully and fairly addresses the claims of all other stakeholders . In total the promoters have offered about 12000 crs additional recovery to all creditors," an Essar spokesperson said in response to an e-mail query.

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