NCLAT's conditional approval for Arcelor-Essar Steel deal comes as a shot in the arm for Lakshmi Mittal, who has been trying to enter the Indian market for more than a decade now. (Bloomberg)
NCLAT's conditional approval for Arcelor-Essar Steel deal comes as a shot in the arm for Lakshmi Mittal, who has been trying to enter the Indian market for more than a decade now. (Bloomberg)

NCLAT gives conditional nod to ArcelorMittal's Essar Steel takeover

  • Share of proceeds that lenders and operational creditors are entitled to in ArcelorMittal's offer for Essar Steel will be decided later
  • NCLAT asked the Insolvency and Bankruptcy Board of India to submit a ratio of the distribution of funds

New Delhi: The National Company Law Appellate Tribunal (NCLAT) on Monday gave conditional approval to Luxembourg-based ArcelorMittal’s 42,000 crore bid to take over domestic steel producer Essar Steel.

The resolution professional can go ahead with the turnaround plan for Essar Steel involving its sale to ArcelorMittal, but share of proceeds that lenders and operational creditors are entitled to will be decided later, ruled the two-member bench headed by Justice S.J. Mukhopadhaya.

NCLAT will hear appeals by various creditors and decide whether or not the resolution plan is discriminatory to different creditors.

The tribunal allowed Standard Chartered Bank to seek advice from the Insolvency and Bankruptcy Board of India (IBBI) on the average percentage of debt that financial and operational creditors are granted in various approved corporate rescue plans. Thus, the final resolution plan for Essar Steel will be subject to the tribunal’s final order.

The decision is expected to be a shot in the arm for the world’s largest steelmaker run by billionaire Lakshmi Mittal, who has been trying to enter the Indian market for more than a decade now.

“In the circumstance, we allow appellants to implead the Insolvency and Bankruptcy Board of India as a pro forma respondent and will inform the secretary of the Insolvency and Bankruptcy Board of India who may engage a lawyer to assist the appellate tribunal and may submit its opinion," said the order.

The next hearing on the matter is scheduled on 27 March.

ArcelorMittal, in a joint venture with Japan-based Nippon Steel & Sumitomo Metal Corp., has offered an upfront cash settlement of 42,000 crore to lenders and 8,000 crore capital infusion.

However, the National Company Law Tribunal (NCLT) had, in its order earlier this month, asked ArcelorMittal to offer 15% of the upfront cash settlement of 42,000 crore, or 6,300 crore, to operational creditors. The original resolution plan only offered 196 crore to operational creditors against claims of 4,976 crore.

The NCLT order means that financial creditors, the banks, will have to take a deeper haircut on the asset, Mint had earlier reported on 9 March.

Directors of Essar Steel had challenged the NCLT’s approval of ArcelorMittal’s bid for the debt-laden company, saying that their offer of 54,389 crore was better, as it cleared the entire money it owed to financial and operational creditors.

Standard Chartered Bank, which is among the committee of creditors of Essar Steel, also challenged the order of the bankruptcy court as it was seeking a recovery of a higher share of dues than envisaged in the resolution plan.

ArcelorMittal’s resolution proposal provides financial creditors 41,987 crore out of their total dues of 49,395 crore. Operational creditors, under the plan, would get just 214 crore against the outstanding 4,976 crore. If ArcelorMittal’s plan is implemented, Standard Chartered will only get 60 crore against its claims of 3,187 crore from Essar Steel, PTI reported.

ArcelorMittal and Essar Steel did not respond to emails sent to them till publishing of this story.

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