NCLT rejects Essar Steel’s plea to withdraw

The NCLT bench said the application for withdrawal of insolvency proceedings of the Insolvency and Bankruptcy Code (IBC) could be considered only if it was filed by the applicant who initiated the move, which is State Bank of India and Standard Chartered Bank.

According to the bench, there is no illegality in the lenders accepting the proposal by ArcelorMittal. About 99 per cent of the committee of creditors had voted in favour of the ArcelorMittal proposal.

“Today’s ruling protects the integrity of the IBC and ensures its legitimacy as a rules-based law,” said an ArcelorMittal statement. “This is a positive development for both Essar Steel India and the country more broadly. We hope now for a swift resolution to this case.”

The Ruia family, the promoters of Essar Steel, had submitted a Rs54,389 crore proposal to withdraw the debt-laden company from the NCLT. The Ruias can now appeal to the National Company Law Appellate Tribunal.

But the Ruias are hopeful that their offer would be accepted. “We continue to believe that our offer of Rs 54,389 crore is the most compelling proposal available to Essar Steel creditors,” a Ruias statement said. “It seeks to repay all classes of creditors and fulfills the IBC's overriding objective of value maximisation that has been established time and again by courts at all levels. We submitted the proposal under the recently introduced Section 12A of the IBC and the recent judgment of the Supreme Court has established that the section's provisions are applicable retrospectively.”

ArcelorMittal had offered Rs42,000 crore as upfront payment and another Rs8,000 crore of equity infusion into Essar Steel over a five-year period to acquire the company (See: ArcelorMittal wins bankrupt Essar Steel despite Ruias' last ditch effort).
Most lenders accepted the proposal, but Essar Steel Asia Holding Ltd, the promoter of Essar Steel, proposed in October a much higher amount to clear all dues of the company.