Ahmedabad bankruptcy court has cleared the decks for ArcelorMittal to take over the debt-ridden Essar Steel. The Ahmedabad bench of National Company Law Tribunal (NCLT) approved the resolution plan submitted by world's largest steel-maker ArcelorMittal to the Committee of Creditors (CoC) and Resolution Professional (RP) of Essar Steel. The verdict has paved way for acquisition of the biggest asset under the new bankruptcy law laid down by the central government in 2016. ArcelorMittal will jointly own and operate Essar Steel in partnership with Nippon Steel & Sumitomo Metal Corp, Japan's largest steel producer and the third-largest steel producer in the world, in line with the joint venture formation agreement.
Earlier, on October 25, 2018, the financial creditors had voted in favour of the resolution plan of ArcelorMittal, which has proposed an upfront payment of £4.2 billion to lenders and an additional £ 800 million towards capital expenditure. An official statement from ArcelorMittal said, “We welcome today's pronouncement by NCLT Ahmedabad. While we will need to review the full written order once it becomes available, we hope to complete the transaction as soon as possible.”
While the statutory requirement is to close insolvency cases within 270 days, it took about 600 days for the process to conclude in this case. A two-member bench of Justices Harihar Prakash Chaturvedi and Justice Manorama Kumari passed the order while suggesting the CoC that 15 per cent of the total amount offered by ArcelorMittal be distributed to operational creditors. Essar Steel is the largest among a dozen firms identified by the Reserve Bank of India for immediate bankruptcy proceedings based on two main criteria that the total banking exposure of the company should be at least £500 million and 60 per cent of this exposure should have turned non-performing by March 2016.
Meanwhile, Mukesh Ambani-controlled Reliance Industries Ltd is all set to take over the debt laden assets of textile player Alok Industries, which owed lenders £2.95 billion. The NCLT, Ahmedabad bench, approved the £505 million resolution plan submitted jointly by RIL and JM Financial, with immediate effect. Alok Industries is one of the 12 big firms identified for early bankruptcy proceedings by the RBI.