The lenders are expected to challenge the decision on the distribution of funds in the Supreme Court.

The erstwhile promoters — the Ruias — who had challenged the eligibility of ArcelorMittal under Section 29(A) of the Insolvency and Bankruptcy Code (IBC), which bars promoters of defaulting firms from bidding for stressed assets, are also likely to move the SC next week challenging the tribunal’s decision.

The two-member NCLAT bench, headed by chairperson Justice SJ Mukhopadhaya, was adjudicating on the alleged discrimination in the distribution of funds, among others.

“On Thursday, the NCLAT held that such distribution is “not only discriminatory but also arbitrary…We have noticed a huge discrimination made by the committee of creditors (CoC) in distribution of proposed amount to the operational creditors qua financial creditors.”

The tribunal cited Regulation 38 of the IBC which provides that operational creditors under a resolution plan should be given priority in payment over financial creditors. “…the regulation strengthens the rights of operational creditors by statutorily incorporating the principle of fair and equitable dealing of OC’s rights, together with priority in payment over financial creditors,” it noted.

The bench held the “the CoC has no role to play in the matter of distribution of amount amongst the creditors, including the ‘financial creditors’ or the ‘operational creditors.”

It said the CoC is only required to look into the viability and the feasibility of the resolution plan and should have requested ArcelorMittal to distribute the amount among various creditors and other stakeholders.

Operational creditors had made total claims of `19,719 crore and could get `11,969 crore if lenders lose the appeal in the SC. The bench also directed that the `4,000-crore profit earned by Essar Steel during the resolution period should be distributed between financial and operational creditors on a pro-rata basis.

Ashish Pyasi, principal associate with Dhir & Dhir Associates, said the NCLAT has noticed that discrimination among the same class of creditors is not justifiable and cannot be permitted. “The secured and unsecured financial creditors are also discriminated in the plan. This judgment is reinforcement of what was held by the NCLAT in the matter of Binani Industries that within a class of creditors there should not be any discrimination,“ Pyasi, said.

Against their admitted claims of `45,559 crore, bankers including State Bank of India, IDBI Bank and Canara Bank stand to recover `30,030 crore, or 60.7%. At its October 25, 2018 meeting, the CoC had decided to retain `41,909 crore or 91.99% of the receivables; operational creditors were to get very little. After some prodding by the NCLAT, the lenders pruned their share to `40,910 crore or 89.80% of the receivables, leaving the rest for the operational creditors.

Virtually rejecting the plea by the Ruias challenging ArcelorMittal’s eligibility, the appellate tribunal said, “….no ground is made out to entertain the appeal”. The NCLAT said that the matter had been settled by the Supreme Court and it can’t be “re-agitated again and again”.