Prashant Ruia, along with Essar Steel directors have moved the Ahmedabad bench of the National Company Law Tribunal (NCLT) on February 1, citing the January 31 order of the Supreme Court
The Ruias have opened a new front in the much contested Essar Steel.
Prashant Ruia, along with Essar Steel directors have moved the Ahmedabad bench of the National Company Law Tribunal (NCLT) on February 1, citing the January 31 order of the Supreme Court.
The order states that directors of a company facing insolvency should be consulted by the Committee of Creditors (CoC) before arriving at a resolution. The CoC consists of lenders to the insolvent company.
Basing their application on the order, the Essar Steel directors have made four demands:
- To provide the applicants (the three directors) with all resolution plans submitted by potential applicants, which were considered and deliberated by the CoC;
- To provide applicants "with such other documents required for proper deliberations of the resolution plans submitted by potential resolution applicants;"
- and pass appropriate orders to direct the resolution professional to convene a meeting of the CoC and consider afresh resolution plans
The two directors, who are part of the application along with Ruia are: Dilip Oommen, Managing Director and Deputy CEO, Essar Steel; and Rajiv Kumar Bhatnagar, Director (Projects), Essar Steel.
The NCLT had in January turned down an application by Essar Steel Asia Holdings to submit ts plan to Essar Steel's creditors.
While ArcelorMittal's bid of Rs 42,000 crore has the backing of lenders, the Ruias have proposed an offer of Rs 54,000 crore.
Supreme Court's order
The Apex Court was listening to the insolvency case of Ruchi Soya, the country's largest edible oil maker that is now in the insolvency courts.
Even as its resolution case was in process, its director Vijay Kumar Jain, who alleged that he was not allowed to participate in the CoCo meetings. While the NCLAT dismissed his plea, Jain appealed to the Supreme Court.
Though the lenders cited Section 21(2) of the Insolvency and Bankruptcy Code, which says that a "director who is also a financial creditor who is a related party of the corporate debtor shall not have any right of representation, participation, or voting in a meeting of the committee of creditors."
But the Supreme Court said that the condition only applies to directors who are 'related' to the corporate debtor, who in this case are the promoters of Ruchi Soya.
Giving the order, judges RF Nariman and Navin Sinha said:
"The appellants (the director) will be given copies of all resolution plans submitted to the CoC within a period of two weeks from the date of this judgment. The resolution applicant in each of these cases will then convene a meeting of the CoC within two weeks thereafter, which will include the appellants as participants."
The order then asked the CoC to deliberate the resolution plans afresh.
The order will now give more time in the hands of the Ruias, who are keen to retain Essar Steel, the crown jewel of their conglomerate.
They are yet to challenge the NCLT's decision to turn down request to consider their proposal.
Sources close to the development said that the promoters are waiting for the cases, related to operational creditors moving the NCLT, to be first sorted.Meanwhile, the NCLAT has directed the Ahmedabad bench of the NCLT to decide on the Essar Steel case by February 11.