New Delhi: Prashant Ruia, the promotor of debt-ridden Essar Steel, Wednesday submitted before the National Company Law Appellate Tribunal that the resolution plan moved by ArcelorMittal is in violation of the Insolvency & Bankruptcy Code (IBC).
Senior advocate U K Chaudhary, representing Ruia, said that the proposal of ArcelorMittal India was in violation of IBC code as the proposal if approved negates the right of Subrogation of the Guarantor.
"Item 18 in the adendum of the resolution plan says that Subrogation right of the guarantor would stand extinguished on the approval of the resolution plan," he said.
Subrogation means substitution of one person or group by another in respect of a debt. With subrogation right, a guarantor can step into the shoes of a creditor.
According to Chaudhary, this was illegal and was in violation of the Indian Contract Act and requested the appellate tribunal to quash the plan.
"This is also in violation of IB Code," he said, adding that the resolution plan should either be rejected or this clause should be deleted.
Ruia was one of the personal guarantors to financial creditors, on which they gave money to the company, said Chaudhary.
Meanwhile, senior advocate Haren Raval, representing Essar Steel Asia Holdings Ltd (ESAHL) concluded his arguments.
He submitted that the CoC was aware about the ineligibility of ArcelorMittal and despite that, it went ahead and voted in favour of the resolution plan submitted by it.
It has alleged ArcelorMittal chairman and chief executive officer LN Mittal has suppressed vital facts that would otherwise render him ineligible to offer a buyout plan for the distressed steel mill under Section 29A of the Insolvency and Bankruptcy Code (IBC).
Until 31 December 2018, Mittal was a shareholder of Navoday Consultants, which in turn was a shareholder in certain companies run by his brothers Pramod and Vinod Mittal, which had defaulted on bank loans.
Mittal's association with these companies would make him ineligible as a bidder.
While Karur Vysya Bank has also moved the NCLAT claiming dues worth Rs 3.5 crore for KKS Petron.
Karur Vysya, claimed to be a financial creditor of KKS Petron, in which, Mittal paid around Rs 4,000 crore to clear dues to be eligible to bid for EssarSteel.
The appellate tribunal would continue its hearing on Thursday (today).
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Updated Date: May 16, 2019 08:07:37 IST