ArcelorMittal's Essar Steel wait gets longer with Supreme Court status quo

New Delhi: The Supreme Court on Friday halted the resolution process of Essar Steel, holding back ArcelorMittal SA’s takeover bid for the stressed steel mill and enter the Indian steel industry.

The order, temporarily halting a lower court ruling for ArcelorMittal to pay ₹42,000 crore in the next two weeks to Essar, also spells a further delay for banks waiting to resolve their stressed loan accounts of Essar Steel.

An apex court bench headed by Justice Rohinton Fali Nariman ordered the parties to maintain status quo on the 8 March order of the National Company Law Tribunal (NCLT), Ahmedabad, which approved the resolution plan and a 9 April order of the National Company Law Appellate Tribunal (NCLAT), which was to set a date for ArcelorMittal to make the payment.

The court was hearing a plea by Standard Chartered Bank, one of the lenders to Essar Steel, which is unhappy with the settlement it would receive under the resolution plan.

The court also directed the NCLAT to dispose of the case expeditiously.

The next date of hearing at the NCLAT is on 23 April.

The committee of creditors so far has been unable to come to an agreement with the operational creditors and Standard Chartered Bank on how the resolution amount must be modified to increase the latter’s share of the payout.

Standard Chartered, which had more than 7.5% weightage in the voting process, had voted against the resolution plan of ArcelorMittal. Essar Steel owes more than ₹3,400 crore to Standard Chartered Bank but the lender will receive only ₹61 crore, according to the current resolution plan. Financial creditors, who voted in favour of the plan, would receive ₹41,987 crore out of their total dues of ₹49,395 crore.

NCLT Ahmedabad, in its 8 March ruling approving ArcelorMittal’s takeover of Essar Steel, recommended that 15% of the upfront cash settlement of ₹42,000 crore, or ₹6,300 crore, be given to operational creditors, instead of the ₹196 crore they would receive under the current plan against claims of ₹4,976 crore.

The committee of creditors, led by State Bank of India, has so far not agreed to altering the resolution plan to increase the payout to Standard Chartered Bank and the operational creditors.

The status quo order by the Supreme Court implies that financial creditors will not see their settlements come through till NCLAT decides how the amount should be divided.

ArcelorMittal, in a joint venture with Japan’s Nippon Steel & Sumitomo Metal Corp. Ltd, has offered an upfront cash settlement of ₹42,000 crore to lenders and a ₹8,000 crore capital infusion into the plant. This will be the largest resolution under the Insolvency and Bankruptcy Code.

In its 2018 annual report, ArcelorMittal said it is also planning a ₹18,697 crore capex programme for the asset till 2024.

The resolution plan for Essar Steel, however, has dragged on for more than two years now and has been mired in litigation at every step.