The State Bank of India (SBI), the lead banker of the bankrupt Essar Steel, is likely to settle dues of other lenders as it received Rs 40,000 crore on Friday from ArcelorMittal, which is going to takeover the company bringing to an end to the much-prolonged resolution process.
The development followed the tabling of the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019, in the Lok Sabha on Thursday, which also provides for protection of buyers from criminal proceedings against previous promoters of the bankrupt firm.
ArcelorMittal had kept the promised Rs 42,000 crore in an escrow account, but didn't release it immediately after the Supreme Court's order in the case last month, as the company wanted immunity for Essar Steel's assets from probe against its previous promoters.
The SBI had the largest exposure to Essar Steel of over Rs 13,000 crore, while the amount approved by the committee of creditors (CoC) stood at Rs 12,161 crore. The other lenders of Essar Steel included IDBI Bank, Canara Bank and Punjab National Bank.
Both ArcelorMittal and SBI, however, are yet to respond to questions sent by IANS.
As per the resolution proposal, banks would recover over 90 per cent of their claims against Essar Steel, amounting to over 40,000 crore. The operational creditors would initially get Rs 196 crore, and another Rs 1,000 crore later, allowed by the CoC, taking the total repayment to Rs 1,196 crore.
The resolution of Essar Steel can be marked as a landmark in the 3-year-old Insolvency and Bankruptcy Code (IBC). A major roadblock in the resolution was removed by the Supreme Court on November 15 as it set aside the National Company Law Appellate Tribunal's (NCLAT) ruling that provided for equal distribution of proceeds between financial and operational creditors.
The Essar case, which was among the first 12 cases to be referred by the Reserve Bank of India (RBI) for resolution, faced several hurdles as its promoter Prashant Ruia also tried to bid for the company and moved the appellate tribunal for rejection of the ArcelorMittal's Rs 42,000 crore bid.