SC paves way for ArcelorMittal to take over debt-ridden Essar Steel

Tribune News Service
New Delhi, November 15 

The Supreme Court today set aside a NCLAT order which gave equal rights to the secured and unsecured creditors during the insolvency proceedings of debt-ridden Essar Steel, clearing the decks for its takeover by ArcelorMittal.

Setting aside the NCLAT order, a three-judge Bench headed by Justice RF Nariman, said the two set of creditors will be treated differently during the insolvency proceedings and taking over of a debt-ridden firm by another company.

There is no principal of equality between secured and unsecured creditors, said the Bench, also comprising Justices Surya Kant and V Ramasubramanian.

"The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors (CoC) and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside," said the Bench.

The NCLAT had said everybody (secured and unsecured creditors) will get 60.7% of their dues in the event of takeover of a debt-ridden company by another firm under the Insolvency and Bankruptcy Code (IBC), said senior advocate Rakesh Dwivedi, who represented one of the parties in the apex court in the case.

"The appeals filed by the CoC of Essar Steel Limited and other Civil Appeals are allowed. The impugned NCLAT judgment is set aside," the top court said.

The apex court clarified that the Corporate Insolvency Resolution Process of the debtor in this case will take place in accordance with the resolution plan of ArcelorMittal dated October 23, 2018, as amended and accepted by the CoC on March 27, 2019. It has provided for amounts to be paid to different classes of creditors by following Section 30(2) and Regulation 38 of the IBC, the court added.