The National Company Law Appellate Tribunal’s (NCLAT) decision to approve the revised bid of ₹7,950 crore by UltraTech Cement for debt-ridden Binani Cement is likely to be used as a benchmark judgment to secure the interests of operational creditors in upcoming cases at the NCLT.
The judgment is seen as another milestone in the evolution of the case law pertaining to insolvency and bankruptcy cases, which are pending at various stages at various NCLT benches.
About 30 unsecured creditors of Essar Steel, having dues of ₹600 crore, moved the Ahmedabad Bench of the NCLT this week against the Committee of Creditors’ (CoC) decision to vote in favour of ArcelorMittal, despite having a better offer from Essar Steel promoters. The case is likely to come up for hearing on November 26.
“The NCLAT judgment is especially illuminating in the high-profile case of Essar Steel, where the CoC has opted to hand over a Letter of Intent to ArcelorMittal without taking into consideration a resolution plan submitted by the promoters of Essar Steel, which does not discriminate between the interests of financial creditors and operational creditors,” said an official in the know of the development.
Essar Steel promoters had offered to make a payment of ₹54,389 crore to creditors of all classes (secured, unsecured and operational) under Section 12A of the IBC, thereby providing 100% recovery to secured creditors and lenders, and maximum recovery for unsecured creditors. However, the CoC selected ArcelorMittal’s resolution plan of ₹42,000 crore with 92% votes against the total outstanding admitted liability of ₹54,550 crore.
Dhaval Vussonji, the lawyer representing the Binani Operational Creditors Forum, said, “NCLAT has correctly observed that IBC does not provide for discriminatory treatment between the same class of creditors. The dues of the operational creditors must get similar treatment as that of financial creditors. If such an observation is not provided and the operational creditors are given only liquidation value, then it will discourage anyone to provide supply of any goods or services.”
The NCLAT judgment is also likely to impact the upcoming case of Bhushan Power and Steel Limited (BPSL), which received bids from Tata Steel, JSW Steel and Liberty House of the U.K. Tata Steel has moved the NCLAT claiming that the CoC allowed JSW Steel to change the basic parameters of its bid after having declared Tata Steel as the highest bidder previously.
In the initial round of bidding, BPSL received bids of ₹11,000 crore from JSW Steel, ₹17,000 crore from Tata Steel and ₹18,500 crore from Liberty House. Sajjan Jindal-promoted JSW Steel subsequently revised its bid to ₹19,700 crore, which has won lenders’ approval.
