Essar Steel debt resolution hits fresh hurdle as GAIL moves NCLT

Two public sector undertakings, GAIL and Getco, have approached National Company Law Tribunal (NCLT) separately against Essar Steel lenders' approval to ArcelorMittal's bid for the bankrupt steel behemoth, saying operational creditors were left out of it.

In its application with the Ahmedabad bench of NCLT, central gas utility GAIL said the resolution plan submitted by ArcelorMittal "completely fails to protect the interest of operational creditors".

GAIL said it has claim of Rs 907.20 crore against Essar Steel for gas supplied to the steel company from time to time. Of this, about Rs 125 crore has already been admitted in the list of Essar Steel operational creditors.

"The resolution plan submitted is in contravention of Section 30 (2) of Insolvency and Bankruptcy Code (IBC) 2016. That even otherwise the resolution plan is neither legal nor proper in the interest of all creditors," it said calling the resolution plan "arbitrary, irrational, illogical that puts in jeopardy the interest of operational creditors" it said.

Gujarat government's power transmission company, Gujarat Energy Transmission Company (Getco), said in its petition that Essar Steel owes it transmission / wheeling charges for the period from May 2005 to March 2011.

"Getco has submitted its claim of Rs 827.18 crore as an operational creditor. As of October 31, 2018, an amount of Rs 896.52 crore is due and payable (by Essar Steel) to Getco," it said.

Getco has asked NCLT not to approve the resolution plan submitted, and to revise its admitted claim amount to Rs 896.52 crore.

"The resolution plan is not in accordance with the provision of the IBC, 2016 and IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 as it does not reflect the crystallised and legally adjudicated debt/liability of the corporate debtor," it said.

Last week, operational creditors of Essar Steel had filed three applications for a total value of Rs 600 crore. These included Orissa Stevedores for Rs 20 crore, 29 operational creditors for Rs 360 crore, and Arkay Logistics for Rs 227 crore.

The development comes less than a month after Essar Steel's committee of creditors rejected the company's promoters offer to pay Rs 54,389 crore to clear all outstanding dues, including those of operational creditors, and approved ArcelorMittal's bid to pay Rs 42,000 crore to lenders.

Last month, a committee of Essar Steel lenders picked ArcelorMittal's Rs 42,000 crore proposal to take over the debt-laden company by paying Rs 41,987 crore out of total dues of Rs 49,395 crore of financial creditors. Operational creditors, under the plan, are to get just Rs 214 crore against the outstanding of Rs 4,976 crore.

"NCLT does not act as a post office to merely put a seal of approval on the resolution plan cleared by Committee of Creditors. NCLT is compliance of Act and rules and interest of all sets of creditors and if that is not done, NCLT may refuse to put a seal of approval on resolution plan. On the other side, if the resolution plan goes through NCLT, it will bind everyone. Thus, the scrutiny by NCLT of the objections raised by all stakeholders is very crucial and important," GAIL said in the petition.

-With PTI