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The Supreme Court today set aside the order of the NCLAT in Essar Steels Insolvency case, thus holding that NCLAT cannot interfere with the decision of the Committee of Creditors(CoC) which is based on their commercial wisdom.
This paves the way for distribution of claims as decided by the Committee of Creditors, which consists of banks.
The Court also said that Secured and Unsecured creditors, under the principle of parity, cannot be treated as equal, while still balancing the interest of all stakeholders.
The bench of Justices Rohinton Fali Nariman, Surya Kant and V. Ramasubramanian thus said in Committee of Creditors Of Essar Steel India Limited vs. Satish Kumar Gupta that the resolution plan as advanced by Arcelor Mittal in 2018 would continue to operate.
On 2.8.2017, the Adjudicating Authority, being the NCLT, Ahmedabad Bench, passed an order under Section 7 of the Code at the behest of the financial creditors, being the State Bank of India and the Standard Chartered Bank, admitting a petition filed under the Code for financial debts owed to them by the corporate debtor Essar Steel India Limited (hereinafter referred to as “ESIL”), in the sum of roughly Rs.45,000,00,00,000 (Rupees Forty Five Thousand Crores).
The decision of the CoC was challenged by Standard Chartered Bank before the National Company Law Tribunal (NCLAT) on being illegal and discriminatory, on which the NCLAT had ordered equal distribution of funds from the winning bid to both operational and financial creditors.
Arcelor Mittal had won this bid at Rs 42,000 crores but the acquisition process had been due since July this year, when a 2 judge bench of the Supreme Court ordered a status quo in the case.
— India Legal Bureau