Essar Steel insolvency: Lenders move NCLAT for early hearing of case

Essar Steel lenders have moved the National Company Law Appellate Tribunal seeking an early hearing of appeals filed by suitors for the insolvency-bound firm, saying they are losing a lot of money because of the delays.

The NCLAT had on May 22 ordered status quo on insolvency of Essar Steel for two months as it admitted petitions of NuMetal and ArcelorMittal over the bidding eligibility.

State Bank of India (SBI) filed the petition in the NCLAT on behalf of the Committee of Creditors (CoC) of Essar Steel seeking the "earliest possible date for hearing on a day to day basis."

The NCLAT had on May 22 ordered hearing on the appeals on a daily basis from July 23-26.

SBI said the corporate insolvency resolution process of Essar Steel commenced on August 2 and since then the operations of the company are being sustained and largely funded by the CoC.

On top of the Rs 525.69 billion admitted outstanding debt, an interest of Rs 51 billion has accrued on the loans and advances since the insolvency commencement date, it said.

Russia's VTB Capital-based NuMetal and ArcelorMittal are vying for Essar Steel, which operates a 10 million tonnes a year steel plant with about 11,000 employees.

"The early and efficient implementation of any resolution plan is required to ensure maintenance of morale of employees, as well as to ensure the continuity of supply of raw materials," SBI said in the petition.

SBI said the amount of provisioning will increase substantially with the delay in completion of the resolution process causing immense loss to CoC members.

"It is submitted that on account of massive interest being accrued on the loans/advances on a daily basis, which is not considered in the resolution plans, grave financial loss will be caused to the CoC if the hearing of all the connected applications and appeals in the captioned appeal is delayed," it said.

It wanted the insolvency resolution process expedited and all appeals taken up for hearing on an urgent basis.

"Any further delay in arriving at the resolution plan for Essar Steel will significantly impact the valuation and will result in a lesser recovery for the CoC," it added.

NuMetal and ArcelorMittal have filed petitions in the NCLAT challenging the disqualification of their first round of bids.

Both NuMetal and ArcelorMittal put in the second round of bids after the first bids were opined to be invalid -- NuMetal because of it being 25 per cent owned by Aurora Trust of Ruia family, the promoters of Essar Steel; and ArcelorMittal because of it holding shares in loan defaulting companies Uttam Galva Steel and KSS Petron.

The insolvency and bankruptcy law bars participation by promoters of delinquent companies in bidding for assets being auctioned.

For the second round of bid, VTB Bank sought to sever ties with the Ruia family by buying out Aurora Trust's stake in NuMetal.

ArcelorMittal transferred Rs 70 billion to an escrow account of SBI to clear outstanding loans of Uttam Galva and KSS Petron.

In the second round of bidding, mining baron Anil Agarwal's Vedanta Resources also joined the race. Also, JSW joined NuMetal for the bid.

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