LM: No dilution on Feb 12 circular over stressed assets: RBI

16 March 2019: The Reserve Bank of India Saturday maintained that there is no dilution in its stand with regard to February 12 circular on stressed assets recognition and resolution.

“It is reiterated that the Reserve Bank maintains its stand on all aspects of the Framework as has been consistently articulated in its communications, including the clarification given during the post-monetary policy press conference on February 7, 2019,” the central bank said in a statement.

The statement comes amid reports that the RBI seems to be toeing the government line and considering relaxation of some of the aspects of the Revised Framework on Resolution of Stressed Assets issued on February 12, 2018.

As the matter is sub-judice and the Supreme Court has reserved its orders on the matter, the Reserve Bank will not comment on the specific details, it said.

Reserve Bank of India (RBI) Governor Shaktikanta Das last month had said there would be no changes in the circular.

The circular directed lenders to refer any loan account over  2,000 crore under the Insolvency and Bankruptcy Code (IBC) if it is not resolved within 180 days of default.

It also underscored IBC’s status as the cornerstone of the bad loan resolution framework, scrapping all previous mechanisms. The circular imposed a one-day default rule. Banks have to treat a company as a defaulter even if it misses repayment schedule by a day.

However, this harsh norms have been criticised in various quarters, including by a parliamentary committee.

The LiveMint reported

B&B: Essar: Our reputation is at stake, says NCLAT while hearing appeal against ArcelorMittal’s resolution plan

16 March 2019:Our reputation is at stake because of this case. It has been more than 500 days (since the insolvency proceeding began)“, Chairperson Justice SJ Mukhopadhaya of the NCLAT yesterday exclaimed while hearing a batch of appeals moved against the approval of ArcelorMittal’s resolution plan for Essar Steel.

We are going to hear the case“, he added as he laid down certain broad parameters such as equitable distribution of the money, maximization of Essar’s assets and payment of statutory dues etc, on which ArcelorMittal’s Rs. 42,000 crore resolution plan would be tested.

A two-member Bench headed by Justice Mukhopadhaya has, therefore, directed ArcelorMittal to prepare a chart suggesting an “equitable” distribution of the money promised in the resolution plan among all the creditors of Essar Steel.

Standard Chartered Bank, has challenged that March 8 order of the National Company Law Tribunal Ahmedabad Bench approving ArcelorMittal’s resolution plan for Essar Steel, on the ground that the approval process adopted by the Committee of Creditors was illegal.

Appearing for Standard Chartered Bank, Senior Advocate Kapil Sibal contended that the CoC lead by the State Bank of India formed a ‘core committee’ which did not consult it while approving the resolution plan.

He further submitted that as opposed to other financial creditors of Essar getting as much as 92% of their claim, Standard Chartered was merely offered 1.7% which amounts to Rs 60.71 crore. The total amount due to Standard Chartered was nearly 3,400 crore.

Had there been a pro rata distribution, Standard Chartered would have received 85.6%, Sibal said.

It was also alleged that ArcelorMittal has reduced its proposal of payment of Rs 42,000 upfront amount to Rs 39,500.

Replying to the Standard Chartered’s appeal, ArcelorMittal stated that issues of distribution of the money were between the CoC and the operational creditors and it had no role to play in it.

Appearing for ArcelorMittal, Senior Advocate Harish Salve stated,

How the operational creditors divide it amongst themselves, I do not know. It’s between the CoC and the creditors. I have given everything to the CoC.”

The Appellate Tribunal was also informed that apart from the upfront investment of Rs 42,000, ArcelorMittal has also made an additional investment to meet the requirement of Essar’s employees, small operational creditors and working capital infusion to run the plant.

We have invested Rs 196 crore to clear dues of up to Rs 1 crore owed to small unsecured operational creditors; Rs 18 crore was spent on workmen and employees of Essar.”

After hearing Standard Chartered and ArcelorMittal, the Court asked the CoC to consider “cutting 10% of its share” for a  more “equitable” resolution plan.

Either you exercise your power, or we will“, the Appellate Tribunal said as it reiterated that a resolution plan which is discriminatory towards any creditor is liable to be set aside.

Meanwhile, the Appellate Tribunal also heard submissions made by the erstwhile Directors of Essar Steel, Prashant Ruia, Dilip Oommen, and Rajiv Bhatnagar, against the approval of ArcelorMittal’s resolution plan.  Senior Advocate Mihir Thakore stated that the Directors did not get a copy of the resolution plan while it was being considered by the CoC in its meetings.

Stating that the resolution plan has already been approved and the Directors should have objected at the relevant time, Justice Mukhopadhaya said,

You have a bad case. You have a rotten case.

The CoC was represented by Senior Advocate Ravi Kadam.

The matter would be heard next on March 18.

The Bar & Bench reported

BQ: Essar Steel: Can The Creditors’ Committee Ignore Tribunals’ ‘Suggestion’ Of Equitable Allocation?

16 March 2019: ArcelorMittal has crossed an important hurdle in its quest for insolvent Essar Steel Ltd.. The Ahmedabad bench of the National Company Law Tribunal approved ArcelorMittal’s resolution plan which entails payment of Rs 42,000 crore to financial creditors. Though this was challenged by the Ruias, Essar’s promoter, at the appellate tribunal, the NCLAT refused to stay the NCLT order. So far that bodes well for ArcelorMittal.

But several observations in the NCLT order and during hearings at NCLAT may require Essar Steel’s committee of creditors to reconsider the allocation towards Standard Chartered Bank and also operational creditors.

Experts told BloombergQuint that while the tribunals’ comments are ‘suggestions’, if the creditors’ committee accepts them, it will set a bad precedent.

ArcelorMittal’s Plan: Key Objections

NCLT and NCLAT’s observations are in the context of applications made by financial creditor Standard Chartered Bank and 40 operational creditors of Essar Steel.

Standard Chartered Bank had stated that against its admitted claim of Rs 3,487 crore, the resolution plan has allocated only Rs 60 crore to it- that works out to be a 1.7 percent recovery. Compare this to other financial creditors whose recovery rate is as high as 92 percent, it pointed out. And so, Standard Chartered Bank argued that the inspite of being a secured financial creditor, it is being discriminated against by the majority members on the CoC.

The discrimination, it argued, stems from the apportionment formula adopted by the CoC- dues weren’t being paid based on the proof of admitted claim on pro-rata basis but instead were being determined on the value of security possessed relative to the liquidation value of the company’s assets. The bank further stated that if a pro-rata method were to be adopted and each secured financial creditor given 85.6 percent of its claim, that would ensure a reasonable and fair apportionment of the amount.

The pro rata allocation suggested by Standard Chartered Bank looks like this when compared to the current allocation by the CoC –

Essar Steel: Can The Creditors’ Committee Ignore Tribunals’ ‘Suggestion’ Of Equitable Allocation? 

In the same vein, some 40 operational creditors too had complained of inequitable treatment. The NCLT order notes that a few operational creditors with debt value of Rs 1 crore are getting nil amount and others with debt value of Rs 4,700 crore are only getting Rs 197 crore.

Equitable Treatment vs Commercial Wisdom

The NCLT pointed out that the allocation to Standard Chartered Bank and operational creditors is not only unequitable but discriminatory as well. Had the CoC adopted some other fair formula – by reducing their percentage of apportionment on pro rata basis – the maximum debt of almost all creditors would stand satisfied, it explained.

And so, the NCLT advised the creditors’ committee that it should allocate 85 percent of the total amount – Rs 42,000 – on a pro-rata basis to all financial creditors. The remaining 15 percent – Rs 6,300 crore – can be distributed among operational creditors. In framing this as advice and not an order the NCLT also recognised that limitation on judicially reviewing a commercial decision taken by the creditors’ committee.

During the appeal hearings on Friday, the NCLAT too directed the CoC to reconsider the amount being allocated to financial and operational creditors. The appellate tribunal also observed that there cannot be any discrimination between secured creditors. It asked the CoC to convene a meeting to reconsider distribution among financial creditors and also consider allocating 10 percent of the amount for clearing dues of operational creditors.

The Supreme Court, in the Sashidhar case order, clearly stated that the tribunals don’t have the jurisdiction to reverse the commercial wisdom of the creditors’ committee, Ajay Shaw, an insolvency law partner at DSK Legal, pointed out. So this (NCLT and NCLAT advice) can’t be read as a legal whip, he added.

Technically, after a plan is approved, the CoC ceases to function. If I have to take a conservative view, the CoC can reassemble but what can they do differently or are required to do differently under the law? If the CoC gets swayed, they will be giving it a color of mandatory direction when it’s not that. 

Ajay Shaw, Partner, DSK Legal

This in itself will set a bad precedent – what intelligible differentia will CoCs apply to account for such directions in some cases and not in the others, he added.

The formula that the NCLT has suggested to the CoC to reconsider allocation between secured creditors could effectively mean that sensible credit calls taken by lenders at the time of lending are placed in the same bucket as poor credit calls by other lenders when an IBC restructuring occurs, Nilang Desai, partner at law firm AZB & Partners, told Bloombergquint.

This is worrying and could have much wider repercussions. Not all secured creditors can be treated equally and the allocation should be on the basis of security they possess. Let’s say one secured creditor has land and machinery- with 2x cover- and the other has perishable inventory as security- with 0.2x cover – should they really be paid out equally?

Nilang Desai, Partner, AZB

The CoC will be well-advised to appeal against the suggestions made by the NCLT and NCLAT, he added.

At the NCLAT hearing, senior advocate Harish Salve argued on behalf of ArcelorMittal and said the company does not have any opinion on distribution of claims but as far as its offer is concerned, it cannot be increased anymore.

“To any concerns that the CoC may have, this is our offer- Rs 42, 000 crore for financial creditors, Rs 197 crore for certain operational creditors, Rs 18 crores for employees and a working capital infusion of around Rs 8,000cr. They are free to reject it. We are not concerned with the distribution and have no role in distribution. Our money is also stuck,” Salve said.

The appellate tribunal also expressed its concern over the timeline of the case which has gone much beyond the 270 day deadline. ‘Our reputation is also at stake because of this case. It has taken more than 500 days. We will decide the matter expeditiously,” the NCLAT Chairperson said.

The Bloomberg Quint reported

FE: NCLT dismisses Sterling Biotech’s settlement plan approved by financial creditors and proposed by Sandesara brothers

16 March 2019: Beleaguered pharmaceutical company Sterling Biotech’s settlement plant has hit a roadblock. The National Company Law Tribunal (NCLT) has said that the financial creditors accepting the settlement proposal from the Sandesara Group (parent company of Sterling Biotech) creates suspicion even as the company’s promoters have been absconding, the Indian Express reported.

The Mumbai bench of the National Company Law Tribunal (NCLT) questioning the company’s lenders, led by Andhra Bank said that “how the proposal submitted by the Sandesara Group is accepted by the financial creditors creates suspicion when the promoter/director is absconder and ED/CBI is searching for them,” The Indian Express cited.

The NCLT had sent notices to the Ministry of Corporate Affairs, Income Tax office, Enforcement Directorate (ED), SEBI, CBI and RBI for their representations before passing an order.

The group’s promoters — Nitin Sandesara and Chetan Sandesara have been accused of Rs 5,000-crore bank fraud and have been declared economic fugitives. The duo have reportedly been hiding in Nigeria even as ED had already attached and sealed their properties.

“We often get news from newspapers that various government agencies like Enforcement Directorate, CBI and other agencies are unable to trace the promoters of the corporate debtor (Sterling Biotech),” NCLT had said in an order earlier this week.

Sterling Biotech’s lenders had previously agreed to a one-time settlement plan (OTS) made under Section 12A of the Insolvency and Bankruptcy Code (IBC), 2016.

The Committee of Creditors had last week voted to withdraw bankruptcy proceedings against the company after accepting the OTS offer.

The offer made by group’s promoters had reportedly entailed a significant haircut of close to 65 per cent for the lenders. When the resolution professional (RP) asked the lenders to provide him with the details of the OTS offer, sources of funds, the time frame for payments to each lender, compliance with the RBI norms and whether the interests of all stakeholders have been provided for under the OTS offer, Andhra Bank informed the RP that they will directly address the issue with the Tribunal and did not submit any information to the RP, the NCLT order said.

Sterling Biotech was referred to the NCLT in June last year for insolvency proceedings under the Corporate Insolvency Resolution Process (CIRP).

The Financial Express reported

ET: NCLAT supports rejection of Ruias’ Essar Steel offer

16 March 2019: The National Company Law Appellate Tribunal (NCLAT) told Essar Steel Asia Holdings (ESAH) to withdraw its appeal against the rejection of its Rs 54,389-crore offer for Essar Steel, possibly making it harder for the Ruias to regain control of the asset. However, the tribunal said ESAH may be heard during a parallel appeal against the approval of ArcelorMittal’s Rs 42,000-crore resolution plan. 

The Ahmedabad bench of the National Company Law Tribunal (NCLT) had in January rejected ESAH’s plea to consider its bid, taking Essar Steel out of the bankruptcy process. Under the Insolvency and Bankruptcy Code (IBC) only the lenders that had moved NCLT could withdraw Essar Steel from the process, the bankruptcy court had said. 

“No application should have been entertained,” said the two member NCLAT bench led by justice SJ Mukhopadhaya on Friday. “You can withdraw it and argue the main case (against the ArcelorMittal plan).” ESAH may not do so, according to sources close to the entity, but there’s been no official word on this. 

The bench also asked Essar Steel’s committee of creditors (CoC) to consider modifying the distribution of funds under the ArcelorMittal plan. 

This will involve treating Standard Chartered Bank, which has also opposed the plan, on par with other financial creditors. 

It suggested that 10% of the payment offered by ArcelorMittal be used to pay operational creditors with dues of more than Rs 1 crore. ArcelorMittal has already agreed to make whole operational creditors of Essar Steel with dues under Rs 1 crore over and above its 42,000 crore bid. 

“It cannot be that you (other financial creditors) get 92% (of your dues) and they (Standard Chartered) get 1.7%,” said Mukhopadhaya, adding that operational creditors have to be given the same or similar treatment. Standard Chartered stands to get only Rs 60 crore against its claims of Rs 3,187 crore from Essar Steel under the ArcelorMittal resolution plan. 

A pro-rata distribution of the ArcelorMittal bid amount to all financial creditors will lead to each lender receiving 85.6% of its dues. 

“You cannot classify (financial creditors) on the basis of secured and unsecured,” said the bench, adding that operational creditors had to be given similar treatment. “Talk to the financial creditors, either 85.6% (pro-rata payment) or it will go (be liquidated) or we will modify the resolution plan. Please consider 10% (of the bid) to go to the operational creditors which have dues of over Rs 1 crore.” 


Senior counsel for the CoC, Ravi Kadam, said the current distribution plan is fair. “It is not discriminatory, doing it the other way around is discriminatory,” he said. 

He added that the CoC may reject the resolution plan if payments to constituents are reduced because of modifications. 

In response to this, the court said: “Either you will be agreeing or we will be exercising our power (to modify or reject the plan).” 

The bench also dismissed an appeal by erstwhile directors of Essar Steel that they had been unjustifiably removed from insolvency proceedings and were not given access to the resolution application as they had failed to lodge their protest at that time. 

“You have not filed any appeal (at that stage). Your case is not bad… it is a rotten case,” the tribunal said. 

The bench also emphasised the need to complete the Essar Steel insolvency case, which has been tied up in legal proceedings for almost two years. 

“Our reputation is at stake because of this case,” the bench said. “It has taken more than 500 days.” 

In response to calls from the bench for ArcelorMittal to consider raising its bid to match that of ESAH, Arcelor’s counsel Harish Salve said that the company has already paid an additional Rs 7,500 crore to resolve NPAs that they were not obliged to pay and that it valued the project at Rs 42,000 crore. 

ArcelorMittal paid Rs 7,500 crore to resolve bad debts of related parties Uttam Galva and KSS Petron to become eligible to bid for Essar Steel.

The Economic Times reported

ET: Liberty gets 30 days to pay for Adhunik Metalliks acquisition

16 March 2019: An appellate tribunal has given Liberty House 30 days to make an upfront payment of Rs 410 crore towards its acquisition of Adhunik Metalliks.

Liberty House has failed to make payments towards its acquisition of distressed alloy and specialty steel manufacturer after being approved by the CoC as the highest bidder. 

“We allow the appellant Liberty House Group another 30 days to make upfront payment in terms of the resolution plan” said a two-member bench of the National Company Law Appellate Tribunal (NCLAT) led by Justice SJ Mukhopadhyaya on Friday. 

London-based Liberty House has also failed to make payments for Amtek Auto after making a successful bid of Rs 4,200 for the company.

The Economic Times reported

ET: CoC may consider NCLAT plan for Essar’s operational creditors

16 March 2019: Bankers are likely to consider a suggestion by the National Company Law Appellate Tribunal to increase the share of operational creditors in the proceeds from ArcelorMittal’s resolution plan for Essar Steel.

The committee of creditors (CoC) is likely to meet over the weekend to discuss their next course of action. 

The decision will be placed before the court in the next hearing on Monday. 

“The comments of the judge which we have seen on the TV seem to suggest that operational creditors should get 10% of the total amount received from ArcelorMittal from the 5% suggested by us. We will have to consider it. But it is unlikely that we will agree. 

The only hitch is that banks would like the money to come before the month-end and they may be under pressure to close it soon even if it is at a slightly lower value,” said a banker with knowledge of the CoC’s deliberations. 

According to the proposal submitted by ArcelorMittal, financial creditors led by State Bank of India will get 92% of their dues which comes to around Rs 41,987 crore. 

Operational creditors, under the plan, would have got just about 5%, or Rs 214 crore, against the outstanding dues of Rs 4,976 crore. 

The two-judge bench of NCLAT has asked the CoC to consider giving operational creditors 10% of the total proceeds. If this suggestion is accepted, the total amount received by financial creditors would drop to Rs 37,800 crore. 

The counsel representing the CoC opposed the proposal, saying they had approved the Arcelor-Mittal bid for Essar Steel based on the money they would be able to recover from the insolvency process. 

The judge also favoured giving Standard Chartered more of the dues than what is proposed now, suggesting that a pro rata formula be applied for all financial creditors. 

Such a decision would reduce the total amount that financial creditors will get to 85.6% of their dues from 92%. 

Standard Chartered was to get just 1.7%, or Rs 60 crore of its Rs 3,500 crore dues, because unlike Indian banks, it had not lent to the parent company but its subsidiary and did not have first charge of its assets. The bench’s proposal is to ensure that all operational creditors with dues of below Rs 1 crore get 100% of their money.

The Economic Times reported

ET: RCom-Ericsson case: NCLAT declines to direct SBI to release Rs 259 crore

16 March 2019: An appellate tribunal has refused to direct State Bank of India and other lenders to Reliance Communications to release Rs 260 cr of tax refunds, held in a trust fund, to pay the telco’s dues to Ericsson. 

The order passed by National Company Law Appellate Tribunal (NCLAT) on Friday is a setback for RCom, which must pay the Swedish telecom gear maker its remaining dues of Rs 453 crore by Tuesday to ensure its chairman Anil Ambani doesn’t go to jail. 

The telco has already paid Rs 118 crore of the total Rs 571 crore dues. 

“No direction can be given to any party to the settlement (particularly the third party) to perform certain duties to ensure settlement between other parties,” NCLAT said in its order. 

The appellate tribunal also decided not to vacate its last year’s order staying insolvency proceedings against RCom and its subsidiaries. 

“Supreme Court is in seisin of the matter…we are not vacating the interim order dated May 30, 2018 nor passing any direction to refund any amount to any one or other party, till some order is passed by the…Supreme Court,” it said. 

The appellate tribunal also said RCom is free to request the Supreme Court to order SBI to release the funds. “This order will not come in the way of the appellants to ask for relief as sought for in this interim application from…Supreme Court,” it said. 

RCom had moved NCLAT, seeking directions to the 37 lenders led by SBI to release Rs 260 crore directly to Ericsson. Lenders have refused to do so, saying public money can’t be used to settle payment to a private party. 

NCLAT also asked the three parties — RCom, lenders and Ericsson — to find a way to ensure that the matter does not go back to the corporate insolvency process. 

If NCLAT passes an order pushing RCom back into insolvency, then Ericsson would need to refund any funds that it would have got from RCom, the bench observed. 

Interestingly, RCom has said it wants to voluntarily go back into the insolvency process, saying it will help it sell its assets in a time bound manner. 

Under the Insolvency and Bankruptcy Code 2016, financial lenders such as SBI have priority in getting repaid from the sale of assets, while operational creditors like Ericsson are way down the list.

The Economic Times reported

ET: Reserve Bank of India backs finance ministry on debt recast plan

16 March 2019: The RBI told the Supreme Court that the inter-creditor agreement (ICA) aimed at helping debt defaulters avoid bankruptcy proceedings requires the approval of 66% of lenders and not all of them, backing the plan that had been drawn up at the behest of the finance ministry.

Rakesh Dwivedi, senior advocate appearing on behalf of the RBI, clarified that after execution of ICA, all lenders in a consortium don’t have to approve it.

The RBI also told the SC that banks could have continued with various resolution processes that were being discussed before February 12 last year, when a circular issued by the regulator had scrapped such mechanisms.

This seems to contrast with the RBI’s previous stand in cases in the Allahabad and Madras high courts. In a case filed by Infrastructure Leasing & Financial Services in the Madras High Court last year, the RBI had argued that if a restructuring scheme had not been implemented before February 12, 2018, then it became null and void. Governor Shaktikanta Das had said last month that “there is no proposal on the table seeking modifications to the February 12 circular”.

The RBI didn’t reply to queries.

The Centre said it was seeking to resolve the financial woes that ail the power sector and took a firm stand on excluding stressed plants from the RBI circular.

Solicitor general Tushar Mehta argued that if this requires striking down the circular, then so be it. In the Allahabad High Court case, the government had said that such entities should not be categorised as stressed in 90 days and that the deadline of 180 days to resolve a bad loan be extended to 270 days. The ICA comes into play during the 180-day period and the 66% threshold is meant to ensure that smaller lenders don’t stall such plans.

The circular provided flexibility to lenders to undertake any restructuring scheme and in fact did not limit them to the earlier schemes allowed by the RBI, said Dwivedi, senior advocate appearing on behalf of the central bank. It’s not clear whether any such schemes can now be revived.

The bench comprising Justices Rohinton F Nariman and Vineet Saran reserved judgment on the matter on Thursday while asking all parties to make written submissions within 10 days. The matter has been heard daily since March 6.

The SC halted insolvency proceedings on September 11 last year against defaulters in the power, sugar, shipping and textile sectors by staying the RBI circular. It directed parties to maintain status quo while transferring about a dozen cases on the matter in various lower courts to itself. The petitions were then segregated into two buckets — those challenging the constitutional validity of insolvency proceedings and those challenging RBI’s circular on stressed assets.

The February 12, 2018, circular had directed lenders to refer any loan account over Rs 2,000 crore to the bankruptcy process if it wasn’t resolved within 180 days of default. It also underscored the IBC’s status as the cornerstone of India’s bad-loan resolution framework, scrapping all previous mechanisms, such as corporate debt restructuring, strategic debt restructuring and the scheme for sustainable structuring of stressed assets.

The circular also imposed a one-day default rule — a company is treated as a defaulter even if it misses one day of the repayment schedule. This is said to have rattled borrowers and annoyed many within the government, leading to a clamour that it be diluted. The circular had been one of the key measures the regulator took under the governorship of Das’ predecessor Urjit Patel, who quit before his term was over amid a dispute with the government over various issues including autonomy.

Dwivedi, however, maintained the RBI’s stand against exempting the power sector from the circular.

He said the banks should look into individual cases rather than seeking a blanket special dispensation for the entire sector. He said banks have not been able to resolve projects despite getting time since the last Supreme Court order on September 11 last year, when it had stayed the RBI circular. Dwivedi also submitted that initiation of insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) was not a penal measure but aimed at resolving stress in the banking system.

The notification had been legally challenged, with several borrowers and especially the Association of Power Producers terming it impractical and too harsh. The central bank has previously defended the circular, saying it would improve the “trust between counterparties in a transaction.” The circular compelled lenders to identify stress in the loan accounts without delay, it said.

“It lays down broad principles that should be followed in the resolution of stressed assets, with clearly defined rules for ensuring credible outcomes,” RBI had said in its Trend and Progress Report late last year. The rules are aimed at encouraging the prompt repayment of loans and preventing deliberate delays by borrowers that have the ability to repay by the due date, it said.

The Economic Times reported

TT: Essar lenders refuse dues cut

16 March 2019: The committee of creditors of Essar Steel has said it will legally challenge suggestions made by the Ahmedabad bankruptcy court and the New Delhi-based appellate tribunal to set aside a certain sum from the money received from ArcelorMittal to pay off the dues of operational creditors (OC).

Last week, the NCLT had approved the bankruptcy resolution plan of ArcelorMittal, effectively accepting its bid of Rs 42,000 crore for the troubled steelmaker. But the tribunal advised the CoC to set aside 15 per cent of the money they receive from the London-based Mittals to pay off the operational creditors, which have no representation on the CoC.

On Friday, the NCLAT — which is hearing a challenge from the Ruias, the erstwhile owners of Essar Steel — suggested the financial creditors should set aside 10 per cent. The financial creditors led by the State Bank of India have resisted the suggestions and are weighing their legal options — a precipitate course of action that the NCLAT felt would only delay the resolution plan for Essar Steel.

Several Indian state-run banks may have to make provisions for their loans to Essar Steel if they fail to recover the money from the Mittal offer by March 31.

The NCLAT judge was also brusque with the counsel for the Ruias, saying the tribunal would hear his arguments against the NCLT order favouring ArcelorMittal later as he had a “rotten case”.

Last October, the Ruias had offered to stump up Rs 54,000 crore in a last-ditch bid to head off the prospect of losing control of the steel maker.

The offer was rejected because the late bid violated the regulations of the bankruptcy resolution process.

The NCLAT bench also heard the plea of Standard Chartered Bank, which is opposing the NCLT order on the ground that it was getting only 1.7 per cent of the claim compared with 85 per cent by secured financial creditors.

The bench, which will hear the matter on Monday, asked the CoC to consider paying StanChart in the same ratio as the other lenders. While suggesting a 10 per cent share for the OCs, which will translate into Rs 4,200 crore, NCLAT said the “related parties” of the existing promoter groups need not be paid.

Harish Salve, who represented ArcelorMittal, said all OCs that have a claim of less than Rs 1 crore were being paid in full. OCs are getting Rs 196 crore out of their combined claim of Rs 4,700 crore. The bench asked for a detailed disclosure of the list of creditors, their claims and payments under the AM plan .

ArcelorMittal had said it was willing to complete the transaction by paying off the creditors as soon as possible and implement the plan. It now appears that the lenders are unwilling to accept money without a resolution on the apportionment with the other creditors.

The NCLT had observed it had limited jurisdictions in encroaching into the commercial wisdom of CoC to alter the plan but still suggested they should share more with the operational creditors.

The Telegraph reported