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ArcelorMittal resolution plan violative of IB Code - Mr Prashant Ruia to NCLAT

Steel News - Published on Thu, 16 May 2019

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ET reported that Mr Prashant Ruia has submitted before the National Company Law Appellate Tribunal that the resolution plan moved by ArcelorMittal is in violation of the Insolvency & Bankruptcy Code. Senior advocate Mr UK Chaudhary 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. He said "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. This is illegal and in violation of Indian Contract Act. This is also in violation of IB Code.Resolution plan should either be rejected or this clause should be deleted.”

Meanwhile, senior advocate Haren Raval, represeting Essar Steel Asia Holdings Ltd 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.

Mr Ruia has alleged ArcelorMittal chairman and chief executive officer Mr 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. Until 31 December 2018, Mr Mittal was a shareholder of Navoday Consultants, which in turn was a shareholder in certain companies run by his brothers Mr Pramod and Mr Vinod Mittal, which had defaulted on bank loans.

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.

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Posted By : Sanju Moirangthem on Thu, 16 May 2019
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