The money paid by Mittal will go to banks, mostly state-owned, whose Rui loans have not lost.
In terms of money involved, this figure is among the biggest insolvency resolutions. The outcome, important to banks and the government seeking to recover from the NPA, came after a painstaking journey that saw intense litigation, raising doubts as to whether the bankruptcy law could successfully recover the crooks' loans to chronic defaulters.
The SC Committee's order brings fresh hope to the process by stressing that the Committee of Creditors will have a say in the resolutions, with the role of the International Trade Company Court and the National Company Law Court of Appeal (NCLAT) limited to considering whether the process is in process. in accordance with the Bankruptcy and Bankruptcy Code.
Esar Steel was among the first in a series of dozens of high-profile bad debt cases listed by the Reserve Bank of India for bankruptcy action in June 2017. Although the law provides for dismissal for a maximum of 270 days, it resulted in a series of cases in various forums throughout the settlement process, spanning nearly 28 months.
ArcelorMittal's takeover bid for the Indian company was approved by the Bank-led Committee of Creditors (CoC), but a fresh hurdle emerged after the NCLAT ruling, which saw it as a financial creditor as a bank and an operating creditor as a seller be treated equally while paying fees.
According to the IBC, the Committee of Creditors is tasked with making major decisions along with a professional resolution once the proceedings are initiated by the National Company Court.
The lenders moved the trial court and bench of Justice R F Nariman, Surya Kant and V Ramasubramanian singled out the NCLAT order. In the 164-page judgment, the bench disclosed the role of resolution-seekers, resolution professionals, the CoC and the authorities in bankruptcy proceedings.
The government also faced a setback when the court overturned a provision by the IBC that made it "mandatory" to complete the bankruptcy procedure within 330 days.
However, he seemed pleased with the fact that the Esar case was finally over. Finance Minister Niramala Sitaraman said the ruling strengthened the credibility and substance of the IBC and would help improve the settlement process.
"This much-awaited ruling also relies on compliance with numerous IBC laws that were tested in different courts. This should significantly reduce the scope for lengthy disputes under the IBC and ultimately lead to faster resolutions of activated funds, "added SBI President Raines Kumar.
Emphasizing the priority of the Committee of Creditors, the SC bench said that the judging body could not interfere with the commercial decision made by the CoC and the limited judicial review available to it to see whether the commission had regard to the fact that the corporate debtor should proceed take place during the bankruptcy process if it is to maximize the value of its assets and take care of the interests of all stakeholders, including operating creditors.
The court further said that the tribunals should refrain from interfering with the CoC's trade decision and that they could for the most part ask the committee to reconsider the resolution plan. "It is clear that when a CoC exercises its commercial wisdom to make a business decision to revive a corporate debtor, it must necessarily consider these key features of the Code before making a commercial decision to pay compensation to financial and operating creditors. There is no doubt that the ultimate discretion as to what to pay and how much to pay for each class or subclass of creditors lies with the Committee, but the decision of such committee must reflect the fact that it took into account the maximum value of the corporate debtor's assets and the fact that has properly balanced the interests of all stakeholders, including operating creditors, ”the report said.
"The NCLAT judgment which replaces its wisdom on the Committee of Commerce's wisdom of creditors and which also directs the receipt of a number of claims made by the applicant for a resolution, without prejudice to his right to appeal against the said judgment , therefore it must be set aside, ”the report said.
On the issue of equality for all approaches to the recognition of the rights of different classes of creditors, the bench says that if allowed, then secured creditors will in many cases be stimulated to vote for liquidation rather than for settlement as they would had better rights if the corporate debtor had to be liquidated instead of approving a resolution plan. "This will defeat the whole purpose of the Code, first of all to ensure that a solution to 89 distressed assets occurs and only if it is not possible, should liquidation follow," the report said.