Insolvency row: L&T terms Bhushan Steel's resolution plan 'discriminatory'

Tata steel emerged as highest bidder for Bhushan Steel with offer of Rs 352 bn in cash along with 12.27% of equity

Larsen & Toubro Ltd (L&T), which is an operational creditor to Bhushan Steel Ltd, on Monday termed the resolution plan of debt-ridden firm as "discriminatory" and "arbitrary" saying its Rs 9 billion (Rs 900 crore) outstanding has not been given due priority by the Committee of Creditors (CoC).

L&T, through its counsel claimed it to be an "operational secured creditor" of Bhushan Steel as it has also contributed into the company by providing plants and machinery, like the other secured creditors of the debt-ridden firm and sought a higher preference in repayment of dues before NCLT.

Meanwhile, another firm Bhushan Energy Ltd (BEL) today moved the National Company Law Tribunal (NCLT) over termination of its power purchase agreement (PPA) with Bhushan Steel Ltd.

 

According to senior advocate Mukul Rohatgi, appearing for the engineering and construction firm L&T, only Rs 1,200 crore has been allotted for the operational creditors under the resolution plan.

"Rs 200 crore (Rs 2 billion) is for pro rata distribution to all operational creditors and balance Rs 10 billion (Rs 1,000 crore) would depend on their discretion," Rohatgi said, adding "according to me, this type of treatment is discriminatory and arbitrary".

He further said: "Our case is different... We have contributed to their plant with goods and machinery which are embedded in the earth and are immovable property... We are a secured creditor."

Rohatgi contended that L&T can not be treated like other operational creditors of Bhushan Steel and it should be given "priority" over them.

Under the Insolvency and Bankruptcy Code, 2016 (IBC), the CoC consists mainly of secured financial creditors and they have a priority in the repayment of debt.

While resolution professionals of BEL, which is also going through insolvency proceedings, contended before the NCLT that termination of PPA with Bhushan Steel and avoidance of any payment by the successful bidder would be against the contract.

"It did not provide for unilateral termination of the contract," said the counsel appearing for BEL adding that it was like a capital power plant of Bhushan Steel which used to purchase its 100 per cent power generation.

NCLT would continue its argument tomorrow and CoC and Tata Steel, the successful bidder, are expected to argue.

Meanwhile, the employees of the Bhushan Steel Ltd today concluded their arguments, where they have contended that Tata Steel was not entitled to bid for the company under Section 29 A of the IBC Code.

Tata steel has emerged as the highest bidder for Bhushan Steel with offer of Rs 352 billion (Rs 35,200 crore) in cash along with 12.27 per cent of equity.

As on February 1, 2018, Bhushan Steel had a total debt of Rs 571.6 billion (Rs 57,160 crore).