Debt-laden Essar Steel on Friday said the company will be reapproaching the committee of creditors (CoC) under Section 12A of the Insolvency and Bankruptcy Code (IBC) with a very compelling offer.

“The Section 12A amendment was introduced in June 2018 with an objective that a company could withdraw from the IBC process with 90 percent consent of the lenders. It was subsequently clarified through regulations that such an offer to withdraw should be made prior to expression of interest (EoI) date," the company said.

Today, the world's largest steel maker ArcelorMittal said it has been chosen by the lenders to takeover Essar Steel for about Rs 42,000 crore.

The development comes a day after promoters of Essar Steel offered to pay lenders Rs 54,389 crore, including Rs 47,507 crore upfront cash payment to clear all dues of lenders, and pull out the firm from insolvency proceedings.

The company further said, "In the current case Essar Steel was admitted into NCLT on August 2, 2017 and EoI date was October 20, 2017. Section 12A provision did not exist then. In the true spirit of the June 2018 amendment, an opportunity to withdraw from IBC process under Section 12 A should not be denied to ongoing cases where EoI stage was over prior to this amendment.”

Essar Steel said, “There are instances in the context of IBC process where to aid the ultimate objective of maximisation of value and protection of interest of all stakeholders, CoC and judicial forums have made exceptions to the process.”

“Even in the case of Essar Steel, Arcelor Mittal was given flexibility to cure their ineligibility by making payment of over dues of their related corporate debtors post submission of bid, keeping in mind maximisation of value so that all lenders dues could be cleared,” the company added.

"By giving an opportunity to shareholders of Essar Steel to make an offer under Section 12A, the CoC will reinforce the above objective of value maximisation in the interest of all the stakeholders. An offer under Section 12A which is superior in all respects to the current Arcelor Mittal proposal being considered, that offers maximum value to all stakeholders including operational creditors and provides 100 percent repayment to the lenders, cannot be ignored citing some process lacunae," it said.

Meanwhile, the Ruia family’s last ditch attempt to regain control of Essar Steel is unlikely to be entertained by the lenders, sources privy to the developments told CNBC-TV18.

The banks have sought legal opinion on the surprising offer of Rs 54,000 crore made by the Ruias and have advised against accepting this offer for multiple reasons, according to multiple people familiar with the development.

First, the seriousness of the offer itself is questionable with no clear source of funds disclosed to bankers. Second, Essar had argued that Section 12A of IBC could be used to withdraw the company from insolvency proceedings. To this, lawyers have advised that Section 12A is only applicable before EOI have invited, which was almost a year back in this case.

First Published:Oct 26, 2018 4:26 PM IST