Essar Steel case: Banks cheer SC ruling, expect faster resolution in other cases

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Essar Steel lenders, who have been counting on recovery of dues from the troubled company since past several quarters, can finally breathe easy as the Supreme Court ruled in the favour of Committee of Creditors (CoC) in a landmark judgement on November 15.

"CoC supremacy has been upheld. I don't think there is a need for CoC to be meet again. The CoC had already made the decision. I expect the process to take the normal course and move forward as the SC has given its judgement," State Bank of India (SBI) MD Dinesh Kumar Khara told Moneycontrol.

SBI, which had the highest claim of Rs 13,226 crore, had fully provided against its exposure to the troubled steelmaker. The lender expects to recover around Rs 12,000 crore from the account, Khara said.

As per the CoC decision, other lenders like Punjab National Bank, ICICI Bank and Union Bank of India would receive Rs 2,701, Rs 2,110 and Rs 1,952 crore respectively.

Khara added that the SC ruling has paved the way for faster resolution in other cases going forward. "There were other cases also where the CoC's decision was questioned by the NCLT. I expect faster resolution in such cases after today's judgement," he said.

Financial creditors stood a chance to recover Rs 41,987 crore of their total claims of Rs 49,395 crore, while operational creditors were to get Rs 214 crore as against their claims of Rs 4,976 crore, according to the plan finalized by the CoC last year.

As per the revised plan, lenders had agreed to set aside Rs 1000 crore more for operational creditors as part of the settlement offered by AcrcelorMittal.

In July, the National Company Law Appellate Tribunal (NCLAT) said that financial creditors and operational creditors were to be treated on par. This decision was later challenged by the financial creditors.

"All we needed is that the apex court gives the CoC an upper hand," said a senior official from a state-run bank. "This will smoothen out the process for reaching decisions in other cases as well," the official added.

Lenders have been grappling under the burden of aging provisions due to prolonged delay in the resolution of non-performing assets (NPAs) under the Insolvency and Bankruptcy Code (IBC). As of June 2019, 2,162 accounts were referred to the IBC out of which only 120 have been resolved.

Mrutyunjay Mahapatra, MD & CEO, Syndicate Bank said that the ruling has cleared out a lot of confusions in the resolution process. "Since the IBC is a new legislation, clarity on the evolving framework was required. This will help in lot of resolutions and a lot of banks to clean up their balance sheets," he said.

Syndicate Bank is expecting recovery of around Rs 900 crore, once the deal materializes.