Tata Steel offers upfront payment of Rs35,200 crore to Bhushan Steel

New Delhi: The insolvency resolution professional for Bhushan Steel Ltd on Monday told the National Company Law Tribunal (NCLT) that Tata Steel Ltd has offered an upfront payment of Rs35,200 crore to lenders, along with a 12.27% stake in the debt-laden steel maker.

Tata Steel will also pay arrears of salary due to 353 employees of Bhushan Steel and ensure continuation of employment.

A bench headed by M.M. Kamur was on 28 March informed by the insolvency resolution professional (IRP) that Tata Steel’s bid for Bhushan Steel had been approved by the committee of creditors (CoC).

Ravi Kadam, appearing for the IRP, submitted that Tata Steel’s resolution plan also proposed a payment of Rs1,200 crore on a pro-rata basis, spread over a period of one year to “certain” operational creditors “vital to running the business”.

Bhushan Steel’s admitted financial debt stood at Rs56,051.16 crore as on 1 February 2018. Operational debt was close to Rs1,050 crore and the liquidation value of Bhushan Steel stood at Rs14,541 crore, Kadam stated.

Additional solicitor general Tushar Mehta, appearing for the CoC, informed the tribunal that after the “commercial viability and feasibility” of Tata Steel’s plan was reviewed by KPMG and First Advantage Consulting Group, the CoC approved Tata steel’s bid with a 99.8% majority vote.

Both Mehta and Kadam raised objections to a plea moved by the employees of Bhushan Steel, challenging the acceptance of Tata Steel’s bid for being in violation of Section 29A of the IBC Code.

Section 29A (d) of the Code makes a person convicted for any offence punishable with imprisonment for two years or more ineligible from submitting a resolution plan. Tata Steel UK, a foreign subsidiary of Tata Steel, was fined £1.4m over violation of health and safety norms by an English Court in February 2018.

It was argued that the plea brought by the employees failed to show how Tata Steel’s resolution plan adversely affected them, when, in fact, it secured their financial and employment status.

A.S. Chandiok, appearing for Bhushan Steel employees, submitted that CoC’s decision of “not rejecting” Tata Steel’s bid for being disqualified under Section 29A(d) was “not informed” and said that the IRP was under a statutory obligation to provide reasons for arriving at a decision in a “speaking order”.

The tribunal had on 19 March directed committee of creditors (CoC) to consider Section 29A objections raised by the employees over the bid submitted by Tata Steel in its meeting. The tribunal had also directed the resolution professional to report about the decision taken by the CoC in this regard to the tribunal.

Bhushan Steel employees were one of the three resolution applicants in the race to bid for Bhushan Steel. The third applicant was JSW Steel.

The matter is listed for further hearing on 3 April.