Ahmedabad: The committee of creditors (CoC) led by the State Bank of India (SBI) on Monday told a bankruptcy court that it was not in the committee’s powers to consider a settlement plan proposed by the shareholders of Essar Steel India Ltd.

Citing a recent Supreme Court order in the debt-ridden Essar Steel case, senior counsel Rajiv Kadam, who appeared on behalf of the committee of creditors challenged the shareholders’ proposal and said it was “impermissible" for them to submit a proposal.

In October, the Supreme Court allowed ArcelorMittal and Numetal to bid for bankrupt Essar Steel provided they paid off the dues of defaulters connected to them within two weeks.

The CoC were to decide on the best offer in eight weeks’ time after also considering the proposal of the Vedanta group, the third bidder, the apex court said.

“The Supreme Court order has mandated CoC to look into the proposals of ArcelorMittal, Numetal and Vedanta. CoC cannot consider any other application as it is beyond the Supreme Court’s directive," said Kadam. He was responding to an application filed by Essar Steel shareholders before the National Company Law Tribunal (NCLT) for consideration of their settlement plan by the committee of creditors.

“Essar Steel Asia Holdings along with Essar Steel India had moved a proposal for settlement on 20 April, 2018, which was rejected by the CoC on 8 May," Kadam told the tribunal.

On 25 October, more than 92% of creditors of Essar Steel voted in favour of handing over the debt-laden company to ArcelorMittal after it cleared pending dues to Uttam Galva and KSS Petron.

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

Meanwhile, the shareholders of Essar Steel submitted a proposal to the CoC for settlement of the entire admitted claims of the financial creditors, operational creditors, and workmen and employees of Essar Steel India Ltd (ESIL), aggregating 54,389 crore. Essar Steel shareholders claimed that their application was in accordance with section 12 (a) of Insolvency and Bankruptcy Code, 2016.

The resolution professional appointed by CoC on 30 October filed ArcelorMittal’s plan with the Ahmedabad bench of the NCLT.

A clutch of operational creditors and Essar Steel shareholders have challenged the CoC and RP’s decision to accept ArcelorMittal’s resolution plan. Standard Chartered Plc has also approached the NCLT as dissenting financial creditor so that it could be heard before the tribunal decides on ArcelorMittal’s bid.

Senior counsel Abhishek Manu Singhvi who appeared on behalf of ArcelorMittal and the CoC’s Kadam argued before the tribunal that Essar Steel shareholders’ application was in violation of section 12 (a) of IBC.

Section 12A states that any application to withdraw must be submitted prior to the issuance of the invitation for expressions of interest and must be accepted by 90% of creditors, they said.

Senior counsel Darius Khambatta who appeared on behalf of resolution professional Satish Kumar Gupta said Essar Steel shareholders’ offer was not valid as it came after the April 29, 2018 deadline. No application can be admitted after 270 days deadline to complete the insolvency process, he said.

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.

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