Essar Steel auction: 29 operational creditors move NCLT against ArcelorMittal's offer

Essar Steel

Nearly 29 operational creditors to Essar Steel have moved the Ahmedabad bench of the National Company Law Tribunal (NCLT) against the resolution plan submitted by ArcelorMittal and passed by the Committee of Creditors (CoC).

The claims of these 29 creditors total roughly Rs 607 crore. Of these, 27 creditors including prominent ones -- Ideal Movers, Kamaljeet Ahluwalia, Arfin India, Sakar Industries and Apex Commodities.-- have made a claim of Rs.360.39 crore on Essar Steel.

One more application of RK Logistics with total dues of Rs 226 crore will be filed separately.

Orissa Stevedores, claims to be among the largest stevedoring companies in India, has said that operational creditors of Essar Steel have been "neglected and overlooked" in the entire resolution process. It further alleged that the financial creditors (banks) are "receiving higher financial recovery" when compared to the operational creditors.

Orissa Stevedores, which had been doing stevedoring and cargo handling for Essar Steel for a decade, has made a claim of Rs 20.4 crore on Essar Steel. The claim has been partially admitted - for Rs 16 crore - by the resolution professional overseeing the Essar Steel auction.

It is one of the 1,169 operational creditors who have made claims totalling over Rs 27,000 crore. Of this, claims of over Rs 5,000 crore have been admitted by the resolution professional.

Sources close to the development said more operational creditors are expected to approach the NCLT, worried that their claims will not be honoured according to the resolution plan submitted by ArcelorMittal.

The plan, submitted by the world's largest steelmaker, includes payment of Rs 42,000 crore to the creditors of Essar Steel. But, as Orissa Stevedores points out in its petition, Rs 214 crore of this will be paid to the operational creditors.

ArcelorMittal's offer was cleared by the CoC, which has filed the plan with the NCLT.

"From the records and information as available in public domain... it appears that ArcelorMittal's resolution plan does not indicate and/or seem to indicate substantial payments to the operational creditors," said the petition filed by Orissa Stevedores.

On the other hand, it pointed out, that the plan offered by Essar Steel Asia Holdings, controlled by the Ruias, has offered a "higher financial recovery" in its plan that includes a total payment of Rs 54,389 crore. This includes Rs 4,995 crore payment to settle claims of operational creditors.

"The steps taken by the resolution professional and the CoC are detrimental to the interest... of the operational creditors... and therefore, the present Applicant is challenging the same...," said the petition.

The petition further asks the tribunal to direct the CoC to "call upon" ArcelorMittal match the offer proposed by the Ruias. It has also asked for a stay on further proceedings.