Another twist in Essar Steel case as BPCL seeks its liquidation at NCLT

GPI Textile's RP too seeks quashing of ArcelorMittal's resolution plan over non-payment of dues

In a yet another turn to the insolvent Essar Steel Ltd (ESL) case, one of its operational creditors (OCs), Bharat Petroleum Corporation Limited (BPCL), on Monday sought the steelmaker's liquidation at the National Company Law Tribunal (NCLT)'s Ahmedabad bench. 

BPCL objected to the Rs 42,389 crore resolution plan of ArcelorMittal which has been approved by 92 per cent of ESL's Committee of Creditors (CoC) before NCLT's two-members bench, consisting of adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari. 

BPCL's legal counsel argued that if sent into liquidation, there was possibility for it to recover in full its dues worth Rs 500 crore, since the promoters, whose settlement proposal of Rs 54,000 crore under Essar Steel Asia Holding Ltd (ESAHL) was rejected by CoC, were willing to pay in full to all creditors. BPCL is claiming the dues against Essar Steel's alleged violation of their take-or-pay gas supply contract since 2016. 

"My submission is that NCLT should take Essar Steel into liquidation because it is misplaced assumption that in liquidation it will not fetch the full price. I, as an OC, may get my full due. Buyers may be prepared to pay full under liquidation...if the company need to be taken to liquidation then so be it," BPCL's legal counsel told the Ahmedabad bench of NCLT. However, the counsel was quick to add that BPCL was not certain what amount it would eventually get under liquidation.

Countering BPCL's arguments, the resolution professional (RP)'s legal counsels told NCLT the possibility of creditors getting paid in full under liquidation was thin. "Nobody has challenged the liquidation value of Rs 15,000 crore," RP's counsel told the bench. 

Under the current liquidation value, none of the creditors will get anything except employees and secured financial creditors, as against ArcelorMittal's Rs 42,000 crore resolution plan "which will put that money back into the economy", as per RP's counsel. Currently, under ArcelorMittal's resolution plan, any operational creditors with dues worth more than Rs one crore weren't likely to be paid anything, the counsel added. 

Further, challenging BPCL's claims of dues worth Rs 500 crore as against alleged violation of take-or-pay gas supply contract, RP's counsel told the bench that this did not fall under the ambit of the resolution plan as it was yet to be decreed as a debt by any authority. 

What's more, RP of L N Mittal's younger brother Pramod Mittal-led GPI Textiles also sought for quashing of ArcelorMittal's resolution plan on grounds of non-payment of dues by the latter to GPI textiles worth roughly Rs 300 crore. 

While, as per an affidavit submitted with the NCLT, GPI Textiles' CoC have categorically chosen to not seek such a quashing, the RP's counsel told Ahmedabad bench that he was acting independent of CoC in public interest. However, the Ahmedabad bench on Monday asked GPI Textiles' resolution professional (RP) to appear in person to clarify his stance. 

On Tuesday, NCLT's Ahmedabad bench will be hearing Essar Steel's unsecured financial creditor Standard Chartered Bank (SCB)'s objections to ArcelorMittal's plan, among other parties. 

Meanwhile, the National Company Law Appellate Tribunal (NCLAT) asked to directed NCLT's Ahmedabad bench to decide on ESL's insolvency case by February 11. NCLAT said that only after the matter had been heard at NCLT Ahmedabad that it may take up the hearing from February 12 onwards. NCLAT also directed NCLT's Ahmedabad bench to hear only one representative of all OCs and need not hear them all individually.