Swarajya Logo
Swarajya Logo
Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Our Views
    Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Magazine
  • Store

About Swarajya

Swarajya is a publication by Kovai Media Private Limited.

Swarajya - a big tent for liberal right of centre discourse that reaches out, engages and caters to the new India.

editor@swarajyamag.com

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Participate

  • Contact Us
  • Write for us
  • Style Guide
  • Jobs

Stay Connected

  • Artboard 2 Copy 6Created with Sketch.
    Artboard 2 Copy 10Created with Sketch.
    Artboard 2 Copy 7Created with Sketch.
    Artboard 2 Copy 9Created with Sketch.
  • Andriod Logo
  • IOS Logo

Business

NCLAT Should Not Allow Ruias To Block The Essar Steel Resolution Repeatedly

R JagannathanWednesday, May 8, 2019 1:52 pm IST
The Essar Steel plant.
The Essar Steel plant.
The Essar Steel plant.
  • The Ruias must be shown the door by the NCLAT for proposing spoiler bids so late in the day.
  • The Supreme Court should do the same if the Ruias decide to appeal further.
  • For several months now, the Ruias who led Essar Steel towards financial ruin by borrowing too much, have been trying to trip and/or sabotage a resolution of its humongous loan default.

    First, they tried to get back into the game by indirectly bidding for the company through Numetal.

    When the government amended the Insolvency and Bankruptcy Code (IBC) last year (section 29A) to ensure that promoters of defaulting companies do not gain control of high-value assets from the insolvency courts by bidding low, both Numetal and ArcelorMittal, which was linked to two other defaulting companies, KSS Petron and Uttal Galva, were excluded by the resolution professional.

    But ArcelorMittal cleared the dues of both companies (worth nearly Rs 7,500 crore), and re-entered the picture as the highest bidder for Essar Steel, at which point the Ruias too re-entered the picture with a bid higher than that of ArcelorMittal (Rs 54,000 crore versus ArcelorMittal’s Rs 42,000 crore). The Committee of Creditors (CoC), and the National Company Law Tribunal (NCLT), opted to go with ArcelorMittal, and the Ruias appealed. But the National Company Law Appellate Tribunal (NCLAT), while declining to stay the decision of the NCLT and the CoC, asked the lenders to try and give a better deal to operational creditors than what they were entitled to. When last heard, the CoC had improved its offer to operational credits by a small amount, but it was yet to receive the final seal of approval from the insolvency courts.

    That’s where the matter stood until the Ruias again approached the NCLAT to reject the ArcelorMittal bid, this time claiming that ArcelorMittal’s prime shareholder, Lakshmi N Mittal, was still a promoter in two other companies, GPI Textiles and Balasore Alloys, companies promoted by one of Mittal’s brothers.

    Without going into the technical details about whether L N Mittal is linked to two other defaulting companies and hence needs to be disqualified from the Essar Steel bid, we need to ask ourselves a basic question: was the purpose of inserting section 29A into the Code to make sure that any bidder pays all his dues in any and every other company he may be associated with, either in the past or currently, or to ensure that existing promoters do not get to reclaim their companies by being allowed to buy them back at the insolvency courts for a song?

    If the real intent and purpose of inserting section 29A into the IBC was to make the new promoters pay for all their past follies, few people will ever bid for any failed company or its assets at the insolvency courts.

    ArcelorMittal has proved its serious intent by not only bidding Rs 42,000 crore for Essar Steel, but additionally clearing the dues of two companies they were associated with (Petron and Uttam Galva), thus effectively taking their total cost of acquiring Essar Steel to nearly Rs 50,000 crore.

    The Ruias, if they can now offer Rs 54,000 crore for Essar Steel, clearly need to be classified as wilful defaulters for this suggests that they had the money to settle with their creditors even before the company defaulted and was dragged to the NCLT. But they probably did not do so in the hope of getting more of their loans written off.

    The NCLAT must put a stop to this nonsense and ensure that no further hurdles are erected in a quick resolution of the Essar Steel case. It would defeat the entire purpose and intent of the IBC if one promoter were to be allowed to repeatedly place hurdles on the path to resolution.

    Given the repeated court challenges and appeals to the Supreme Court in several cases, insolvency cases that were originally supposed to be revolved in 270 days are now stretching close to two years. India’s promoters and banks and the resolution eco-system should not fall victim to the same unending delays that put paid to earlier laws – the Sick Industrial Companies Act and the law on Debt Recovery Tribunals.

    The crony eco-system – banks, politicians and courts – that stymied the earlier laws should not be allowed to destroy the IBC in the same way.

    The Ruias must be shown the door by the NCLAT for proposing spoiler bids so late in the day. The Supreme Court should do the same if the Ruias decide to appeal further.

    In future, spoiler bids should force litigants to pay for the time cost of money. A Rs 42,000 crore bid, if delayed by a year, is worth Rs 2,100 crore less to banks after a year, assuming 5 per cent inflation. The Ruias should be asked to compensate banks for delaying a resolution long after they were deemed ineligible to bid back Essar Steel.

    Tags
    Supreme Court of India
    NCLT
    Ruias
    ESSAR STEEL
    IBC
    ArcelorMittal
    NCLAT
    Sick Industrial Companies Act
    Debt Recovery Tribunals
    CoC
    GPI Textiles
    Balasore Alloys
    Lakshmi N Mittal

    Comments ↓

    An Appeal...


     

    Dear Reader,

     

    As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

     

    Our business model is you and your subscription.  And in challenging times like these, we need your support now more than ever.

     

    We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

     

    Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

    Get Swarajya in your inbox.


    Magazine


    Swarajya Magazine Cover Image
    Merchandise

    Merchandise


      Politics

      Rahul Gandhi To Miss Parliament's Winter Session? Trips Planned To Indonesia, Singapore, Malaysia, Vietnam: Report

      Rahul Gandhi To Miss Parliament's Winter Session? Trips Planned To Indonesia, Singapore, Malaysia, Vietnam: Report

      Nishtha Anushree
      7h

      Tamil Nadu Dashboard: ED Summons To Dist Collectors Stayed By Madras HC; Senthil Balaji Refused Bail On Medical Grounds

      Swarajya Staff
      7h

      State Elections: 18 Per Cent Candidates Grapple With Criminal Cases, Maximum In CPI (M), BRS Next, Reveals Report

      Nayan Dwivedi
      9h

      Economy

      Automobile Retail Sales Hit Record 3.793 Million Units This Festive Season, Surging 19 Per Cent YoY: FADA Report

      Automobile Retail Sales Hit Record 3.793 Million Units This Festive Season, Surging 19 Per Cent YoY: FADA Report

      Nayan Dwivedi
      13h

      Public Sector Is Finally Beginning To Shine Under Modi's Ministrations

      R Jagannathan
      2d

      India's Divestment Struggles Continue As Government Falls Short Of Targeted Proceeds For Fifth Consecutive Year: Report

      Nayan Dwivedi
      4d

      Defence

      Indian Army To Upgrade Its Firepower With 200 Mounted Howitzers And 400 Towed Guns

      Indian Army To Upgrade Its Firepower With 200 Mounted Howitzers And 400 Towed Guns

      Swarajya Staff
      12h

      Islamabad, Ankara Work On Boosting Military Ties; Plan To Locally Manufacture Turkish Origin Anti-Tank Missiles In Pakistan

      Swarajya Staff
      1d

      Strengthening Capabilites In The Central Sector Opposite China, IAF Considers Acquiring Three Air Strips In Uttarakhand: CDS Anil Chauhan

      Swarajya Staff
      1d

      World

      Bangladesh: Why A Strong And Secular Opposition Is Necessary For Protection Of Hindus In That Country

      Bangladesh: Why A Strong And Secular Opposition Is Necessary For Protection Of Hindus In That Country

      Jaideep Mazumdar
      9h

      "Cheering Terrorism, Violence?": TIME Called Out For Playing Down SFJ Founder Pannun's Threat Against Air India

      Nishtha Anushree
      9h

      US Shares 'Legally Presentable' Intelligence, Canada Provides Mere 'Allegations' In Assassination Plots, Says Indian High Commissioner Verma

      Nayan Dwivedi
      14h

      Culture

      M P N Ponnusamy: A Nagaswara Legend Passes Away Almost Unsung

      M P N Ponnusamy: A Nagaswara Legend Passes Away Almost Unsung

      K Balakumar
      8h

      Streamlined Repatriation: India-US Deal To Fast-Track Return Of Stolen Antiquities

      Swarajya Staff
      1d

      Questioning Trend Of Weddings Abroad, PM Modi Bats For Local Weddings, Products To Boost Economy

      Swarajya News Staff
      2d
      States

      infrastructure


      Tushar Gupta
      1

      Border Roads Organisation (BRO): The Silent Force Behind The Uttarakhand Tunnel Rescue Operations

      4 Mins Read
      V Bhagya Subhashini
      2

      Explained: What Is Rat-Hole Mining — Vital Technique Used In Uttarkashi Tunnel Rescue Operation

      3 Mins Read
      V Bhagya Subhashini
      3

      Karnataka: Bengaluru's Rs 377 Crore World-Class Transformation Of Yeshwantpur Railway Station On Fast Track

      2 Mins Read
      V Bhagya Subhashini
      4

      Telangana Rapid Transit: Rs 55,400 Crore Project Aims 60-Minute Connectivity Between Hyderabad And Major Cities Of State

      2 Mins Read