Prashant Ruia, Director, Essar Capital speaks during a news conference at the company's headquarters in Mumbai, India August 21, 2017. REUTERS/Danish SiddiquiReuters

Standard Chartered Bank and Prashant Ruia, member of Essar Steel promoter family, have filed separate appeals in the National Company Law Appellate Tribunal against the bankruptcy tribunal's order last week, which awarded the steelmaker to ArcelorMittal. The British financial services giant is the third largest secured financial creditor of the beleaguered Essar Steel.

The bank has requested the higher tribunal to quash the Ahmedabad bench of National Company Law Tribunal's order that approved the Luxembourg-based steel company's Rs 420 billion debt resolution plan for Essar Steel. Standard Chartered has also sought the rejection of the plan, The Economic Times reported. The bank has maintained that the implementation of ArcelorMittal's plan will lead to its dues being curtailed to just Rs 600 million from the current outstanding amount of Rs 34.9 billion.

Similarly, Prashant Ruia, a member of the suspended board, has decided to file an appeal to seek a stay on the resolution plan. An official appeal has not been filed yet as the written order of the Ahmedabad bench is still awaited. He has mentioned his intention to appeal before a two-member bench, headed by Chairman Justice S J Mukhopadhaya, which asked it to be listed after the NCLT posts its full written order. Ruia contends that members of the superseded board of the company should have been included in all creditor meetings that approved the plan. The argument draws parallels with the recent apex court judgement in the Ruchi Soya case, where the judge had ruled that resolution plans be shared with the suspended board members of the company.

A Tricky Affair

Essar Steel's resolution has turned out to be one of the trickiest ones under the Insolvency and Bankruptcy Code, 2016 (IBC). The case has been dragging on for over 580 days as against the stipulated 270 days under the law due to multiple litigations by the former promoters, Standard Chartered bank and some operational creditors. Last week, NCLT had cleared the decks for Essar Steel's acquisition by ArcelorMittal after mollifying the operational creditors through a larger payout from the resolution amount.

lakshmi mittal
Lakshmi Mittal, chief executive officer of ArcelorMittal.Reuters

The court suggested that the payment of Rs 420 billion by LN Mittal-led ArcelorMittal be distributed among financial and operational creditors in the ratio of 85:15. If the court's suggestion is accepted, operational creditors will get Rs 46 billion as against their total claim of Rs 47 billion, while financial creditors such as Standard Chartered will have to take a big hit.

Former promoters Ruia family's last-minute offer to pay over Rs 540 billion to allow the steel company exit bankruptcy proceedings further complicated the case. Pointing towards continued litigation, last week after the NCLT order was delivered, an Essar Group spokesperson had said, "We continue to believe that our settlement proposal of Rs 543.9 billion is the most compelling one available to Essar Steel creditors and fulfils the IBC's declared overriding objective of value maximisation, which has been established time and again by courts at all levels."