Essar Steel Insolvency: Essar Steel Asia Holdings moves NCLAT challenging ArcelorMittal resolution plan

Essar Steel Asia Holdings Limited (ESAHL) has moved the National Company Law Appellate Tribunal (NCLAT) challenging the approval granted to ArcelorMittal’s resolution plan for Essar Steel..Through its application which forms part of the appeal by Prashant Ruia, ESAHL has sought to place on record “the fraudulent lies, falsehood, suppression and misrepresentation” indulged by ArcelorMittal before the Supreme Court, National Company Law Tribunal (NCLT) as well as the Committee of Creditors (CoC). This is a fresh issue raised by the promoter side, Ruias. Until now, their objection to the acceptance of the resolution plan was a technical one, where they argued that they should have been allowed to be part of the CoC meetings which led to selection of the resolution plan..Appearing for ESAHL, Senior Advocate Mukul Rohatgi today remarked,.“All the appellants are arguing that ArcelorMittal’s resolution plan is bad.. my reason goes to the root..If I succeed, their appeals will also be allowed, they need not argue..“.After briefly hearing Rohatgi, the Appellate Tribunal directed ArcelorMittal to file its response. The matter is likely to be heard next on May 13..The case progresses after the Supreme Court had in April 2019, ordered status-quo on payments by Arcelor Mittal to Essar Steel. A two-member Bench headed by Chairperson Justice SJ Mukhopadhyay was hearing a batch of appeals against a March 8 order of the NCLT, Ahmedabad Bench approving ArcelorMittal’s resolution plan for Essar Steel. An appeal has also been filed by Standard Chartered Bank (SCB) against the same order, seeking equal treatment in the distribution of resolution value. Currently, SCB is being paid close to 1.7% of its debts while other financial creditors are being paid close to 92%. Separate, the operational creditors have also appealed against the same order..Earlier in October 2018, the Supreme Court had afforded one more opportunity to both ArcelorMittal and Numetal to clear the debts owned by their related parties to become eligible to bid for Essar Steel. Pursuant to the order, ArcelorMittal cleared dues worth Rs. 7,000 crore with respect to Uttam Galva and KSS Petron and succeeded as the winning resolution applicant for Essar Steel. It is now ESAHL’s claim that, those are not the only two NPAs ArcelorMittal is associated with..ESAHL, a shareholder of Essar Steel, has contended that ArcelorMittal misled all the parties into believing that Lakshmi N Mittal had completely exited from the Indian businesses of his brothers, Pramod and Vinod Mittal, specifically their companies, Gontemann Peipers India Ltd, GPI Textiles Limited and Balasore Alloys Limited. ESAHL has further stated that these companies are presently NPAs and are held by one Navoday Consultants which had Lakshmi Mittal as a shareholder and promoter as on September 30, 2018..ESAHL sought to rebut ArcelorMittal India’s claim that neither Lakshmi Mittal nor any company in ArcelorMittal group was a shareholder of any of the companies declared as NPAs. ESAHL relied on the averment made by the Resolution Professional for GPI Textiles before the NCLT, listing Lakshmi Mittal as a shareholder and promoter of GPI textiles.ESAHL has thus contended that ArcelorMittal “malafidely concealed” the NPA debt of these companies in order to circumvent the directions passed by the Supreme Court and avoid making for it is related parties..“ArcelorMittal has misused the liberty granted by the Hon’ble Supreme Court under Article 142 of the Constitution of India and suppressed that it was ineligible under Section 29A of the IBC. The only way the ArcelorMittal could have qualified is by making payment of the liabilities of the aforesaid Companies within the period extended by the Hon’ble Supreme Court. Having suppressed the aforesaid fact and failed to discharge the NPA of the three Companies which were under promotership of ArcelorMittal it stands disqualified and its plan ought to be rejected.“.Stressing on the fact that Lakshmi Mittal subsequently sold his shareholding in Navoday consultants in October-December 2018, ESAHL further argues that he was aware of his status in Navodyay and Navodyay’s classification as a promoter of the companies..ESAHL has therefore prayed for the rejection of ArcelorMittal’s resolution plan for Essar Steel in terms of Section 29A (c ) and (g) of the IBC..Bar & Bench is available on WhatsApp. For real-time updates on stories, click here to subscribe to our WhatsApp.