With the Essar Steel bankruptcy resolution case caught in a legal quagmire for almost two years, and counting, the State Bank of India has now moved the Debt Recovery Tribunal (DRT) against the beleaguered company's promoters, Prashant and Ravi Ruia. Essar Steel owes over Rs 63,000 crore to a consortium of lenders, of which SBI reportedly has the largest exposure. A decree from DRT will lead to the attachment of all personal assets of the Ruias, both in India and abroad.
According to IANS, the lender had invoked the personal guarantees worth Rs 15,000 crore of the promoters about 6-8 months ago and on Monday it filed a recovery suit against them before the DRT, Ahmedabad. This is reportedly one of India's biggest-ever personal guarantee cases ever filed.
In early March, the National Company Law Tribunal (NCLT) had approved ArcelorMittal's Rs 42,000 crore takeover bid for Essar Steel, which translated to a haircut of around 15% for the financial creditors like SBI. That's a collective loss of around Rs 21,000 crore including overdue interest and penalties. Although the matter has been challenged at the National Company Law Appellate Tribunal, the country's largest lender reportedly hopes to recover its balance dues by getting the promoters' global assets attached.
However, Essar Steel officials claim that the Ruias' guarantees are not at risk. "Total admitted dues of the secured creditors as verified by the Resolution Professional of Essar Steel is Rs 45,000 crore. Essar Steel Asia Holdings Ltd has already offered to repay the secured creditors these dues in full, and Arcelor Mittal plan provides for Rs 42,000 crore," an Essar Steel spokesperson told the agency. Hence, there isn't any shortfall for secured financial creditors. "Personal Guarantees were extended for only part of secured loans [approximately Rs 11,000 crore]. Considering recovery as above from the approved resolution plan, there may not be any shortfall and guarantees are not at risk," said an Essar Steel official.
The next date of the hearing at the NCLAT is May 13. Meanwhile, the Supreme Court also stayed the disbursement of the funds to the creditors earlier this month directing parties to maintain status quo. So the resolution journey for Essar Steel, one of the initial 12 companies identified by the RBI for insolvency proceedings in 2017, is far from over.
With PTI inputs
(Edited by Sushmita)