ArcelorMittal's bid for the bankrupt Essar Steel clears another hurdle that will give banks 60% off their dues-- but the appellate order has done something more
- The National Companly Law Appellate Tribunal has allowed ArcelorMittal's bid for bankrupt Essar Steel.
- The order also sets precedents on how the sale proceeds shall be distributed and limits the discretion available to the committee of creditors.
- Lakshmi Mittal has been fighting to take over Essar Steel for over two years now.
Global giant Arcelor Mittal had made a bid for a bankrupt Indian company Essar Steel. Simultaneously, the order also sets precedents on how the sale proceeds shall be distributed and has redefined the status of different kinds of companies that a bankrupt company owes money to.
The order has said put financial creditors, like banks that lend money, at par with operational creditors (suppliers awaiting payment).
In the case of Essar Steel, the operational creditors include energy companies Indial Oil, ONGC, NTPC, BPCL, and GAIL. Both the banks and the suppliers will get 60% of the dues from the about ₹42,000 crore offered by ArcelorMittal.
However, the committee of creditors that will approve the resolution plan for a bankrupt company does not include the suppliers.
The $12 billion Lakshmi Mittal, chairman of ArcelorMittal, has been fighting to take over Essar Steel for over two years now. The former promoter of the bankrupt company has not given up yet despite his bid to settle the case and regain control has been ruled out. "t appears that new facts regarding ineligibility under Section 29A, which emerged only after the previous judgement of the Supreme Court, have not been given due consideration," an Essar Steel spokesperson told the Mint.
Indian banks are recovering over 1.5 times as much money under the bankruptcy code — but it's still painfully slow