Ahmedabad/Mumbai: The Ahmedabad bankruptcy court has declined Essar Steel Asia Holdings Ltd's (ESAHL) settlement plan to get back control of debt-stricken Essar Steel, resulting in a major setback for the Ruia family. The Ruias have been looking to withdraw the petition under Section 12A of the Insolvency and Bankruptcy Code (IBC) that permits withdrawal of insolvency proceedings subject to approval by 90 percent of the creditors and the National Company Law Tribunal (NCLT).
Over 92 percent of creditors to Essar Steel voted for handing over the company to global steel giant ArcelorMittal Netherlands BV. The settlement proposal that the billionaire Ruia family presented to the consortium of lenders was not "maintainable", a two-member bench of Justice Harihar Prakash Chaturvedi and Justice Manorama Kumari said.
"There is no irregularity in the decision of RP and CoC in rejecting ESAHL' settlement plan," Chaturvedi said while reading out the order.
ESAHL had approached NCLT Ahmedabad last year with a proposal for settling the entire debt for about Rs 54,389 crore. ESAHL, which holds 72 percent of shares in Essar Steel, had challenged the CoC and Resolution Professional's decision to permit ArcelorMittal's resolution plan for Essar Steel, where the resolution process under IBC had been initiated.
The financial creditors had voted for the resolution plan of ArcelorMittal in October. Essar Steel shareholders then proposed to fully pay all its lenders, including operational lenders. The Supreme Court allowed ArcelorMittal and Numetal to bid for bankrupt Essar Steel last year only if they paid off the dues of defaulters connected to them in two weeks at the time.