Photo: Bloomberg
Photo: Bloomberg

Essar Steel operational creditors question CoC over discrimination

  • CoC can not ‘arbitrarily discriminate’ between the operational creditors with claims under 1 crore and above under the IBC
  • As per the 42,000 crore resolution plan for Essar Steel by ArcelorMittal, operational creditors having claims below 1 crore will get their dues and those with claims of over 1 crore will get almost zero

NEW DELHI: Essar Steel's operational creditors with claims of over 1 crore Wednesday alleged that the committee of creditors of the debt-ridden firm has been "monopolised" by its financial lenders and sought equal treatment on par with them.

CoC can not "arbitrarily discriminate" between the operational creditors with claims under 1 crore and above 1 crore under the Insolvency & Bankruptcy Code, they said in a public notice published in newspapers.

Questioning the classification of operational creditors by the lenders, they wondered as "how has COC decided the cut off figure of 1 crore between the same class of admitted Operational Creditors?"

As per the 42,000 crore resolution plan for Essar Steel by the global steel giant ArcelorMittal, operational creditors having claims below 1 crore will get their dues and those with claims of over 1 crore will receive almost zero.

"CoC is interpreting IBC in the narrowest, totally self-serving and one-sided un-balanced manner and consequently arrogated draconian powers for itself for unilaterally maximising the proceeds almost entirely for FCs, leaving nothing for AOCs over 1 crore," the operational creditors with over 1 crore claim contended in the notice.

The CoC has in its resolution plan given around "92% of dues (Principal interest) of financial creditors; nil to operational creditors with over one crore claim and approximately 97% of the dues of operational creditor under 1 crore claim," the public notice said.

The creditors also alleged in the notice that CoC is paying merely "lip service" to the suggestions of the NCLT and NCLAT as it has now offered 1,000 crore to operational creditors, which actually means that the creditors with over 1 crore claim will get only 21% with a 79% haircut.

After this, operational creditors with below 1 crore claim will get 97% of their claims, while the financial creditors would receive 90% of their dues.

According to the notice, financial creditors will not only receive the entire principal amount but also a significant part of interest.

The total dues of operational creditors with below 1 crore claim is only around 200 crore and the dues of operational creditors with above 1 crore claim stood at 4,900 crore, it said.

The notice further alleged that the entire proceedings before the NCLT and NCLAT "was monopolised by design or otherwise by high profile influential lawyers of CoC and others".

Last week, the Supreme Court has stayed the payment of money by ArcelorMittal to lenders to buy Essar Steel over a petition filed by various stakeholders.


Close