Tri­bunal Ap­proves Bankruptcy Process Against Es­sar Steel

NCLT up­holds SBI’s choice for ap­point­ment as in­terim res­o­lu­tion pro­fes­sional

The Economic Times - - Companies: Pursuit Of Profit -

Ahmed­abad: In a ma­jor blow to the Ruia broth­ers led Es­sar Steel, the Na­tional Com­pany Law Tri­bunal (NCLT), Ahmed­abad on Wed­nes­dayap­provedthe­bankruptcy pro­ceed­ings against the steel­maker and up­held State Bank of In­dia’s choice for ap­point­ment as an in­terim res­o­lu­tion pro­fes­sional.

With this or­der, Satish Kumar Gupta of con­sult­ing firm Al­varez and Marsal In­dia will take over the pow­ers of the Es­sar Steel board and work with the man­age­ment in run­ning the day-to-day af­fairs of the steel maker. The Ruia broth­ers and their sons, who have shep­herded the for­tunes of the firm since it was founded a few decades ago, will lose power to di­rect the com­pany’s af­fairs tem­po­rar­ily.

The­cour­tonWed­nes­dayad­mit­ted both pe­ti­tions filed by State Bank of In­dia(SBI)andS­tan­dard­Char­tered Bank (SCB).

“We will re­view the or­der first and then issue the state­ment,” said Es­sar Steel in an e-mail re­sponse. Withthisor­der,therewil­l­beamora­to­rium on trans­fer or dis­posal of any Es­sar Steel assets till the in­sol­vency pro­ceed­ings are set­tled.

The In­sol­vency and Bankruptcy Code (IBC) pro­vides for the takeoverof acom­pany’sman­age­mentby an in­sol­vency res­o­lu­tion pro­fes­sional (IRP) if a pe­ti­tion filed by the lenders is ad­mit­ted by the NCLT. The IRP, who is ap­pointed by the com­mit­tee of cred­i­tors, works with the ex­ist­ing man­age­ment to find a so­lu­tion for six months which can be ex­tended to nine months. If no so­lu­tion is found, the assets of the com­pany are liq­ui­dated.

Es­sar is among the few big cases that have been re­ferred to NCLT for set­tle­ment fol­low­ing an RBI di­rec­tive in June.

Till now, in­sol­vency pro­ceed­ings against Bhushan Steel, Bhushan Stee­landPower,ABGShip­yardand Jy­oti Struc­tures have be­gun.

Es­sar owes SBI, the lead bank, a sum of ₹ 14,860 crore and strongly ar­gued that it is not a “wil­ful de­faulter” and that there has been “no di­ver­sion of funds, fraud or malfea­sance”. Es­sar did not dis­pute the debt due to State Bank of In­dia and Stan­dard Char­tered Bank.

Es­sar also pleaded that non-sup­ply of nat­u­ral gas be­cause of a gov­ern­ment fiat im­pacted the com­pany’s op­er­a­tions se­verely.

WITH THIS OR­DER

Also sab­o­tage by Nax­alites of a cru­cial­slur­ryp­ipelinecausedama­jor dis­rup­tion to its op­er­a­tions.

In re­cent months, Es­sar says it has man­aged to im­prove its steel­mak­ing ca­pac­ity util­i­sa­tion from 35% to some­where between 75% and 80% and has also re­paid some loans. The tri­bunal in its Wed­nes­day or­der while ac­knowl­edg­ing the im­proved per­for­mance said that the debt still re­mains oner­ous. “But the lit­tle progress (in Es­sar Steel’s fi­nan­cial per­for­mance) in the last fi­nan­cial year, there ap­pears to be no scope for Es­sar to re­pay its debt till 25 years or in a span of 25 years.”

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