SC puts on hold ArcelorMittal's takeover of Essar Steel; to hear appeals filed by CoC on August 7
 Time:
2019-07-23

A Bench led by Justice RF Nariman, while agreeing to hear all the four appeals, filed by SBI-led CoC, ICICI Bank, SBI and ArcelorMittal, on August 7, also asked the parties to maintain status quo with regard to the acquisition of Essar Steel till then.


The court said it would resolve all the issues arising from the Essar Steel verdict expeditiously and observed that NCLAT could not have acted as the resolution professional. However, it allowed the monitoring committee to continue work till then.


Banks will likely reign supreme when it comes to commercial decisions concerning firms under the insolvency process: while last week the Cabinet approved amendments to the relevant code to buttress the powers of the committee of creditors (CoC), the Supreme Court on Monday seemed throwing its weight behind the move.


The apex court has put on hold ArcelorMittal’s takeover of debt-laden Essar Steel, after the lenders sought a stay on the National Company Law Appellate Tribunal’s (NCLAT) ruling that reduced their share of sale proceeds from 90 per cent to 60 per cent and also put the financial creditors and operational creditors on a par in settlement of claims.


A Bench led by Justice RF Nariman, while agreeing to hear all the four appeals, filed by SBI-led CoC, ICICI Bank, SBI and ArcelorMittal, on August 7, also asked the parties to maintain status quo with regard to the acquisition of Essar Steel till then.


Also, Justice Nariman cited a February 2019 judgment by the Justice AM Khanwilkar’s Bench in the case, K Sashidhar vs Indian Overseas Bank, where it was held that there is no provision in the Insolvency and Bankruptcy Code that empowers the resolution professional, the adjudicating authorities (NCLT & NCLAT), to reverse the “commercial decision” of the CoC.


The court said it would resolve all the issues arising from the Essar Steel verdict expeditiously and observed that NCLAT could not have acted as the resolution professional. However, it allowed the monitoring committee to continue work till then.


Considering a batch of pleas, Justice Khanwilkar in February had held that NCLT has no authority to evaluate the commercial decision of the CoC to approve or reject a proposed resolution plan as there is complete autonomy regarding the commercial decision or wisdom of financial creditors.


Challenging the awarding of higher payout to Essar Steel’s operational creditors and treating them on par with secured lenders as directed by the NCLAT, CoC said that the decision to modify the distribution of proceeds would lead to higher lending rates and increased risk of capital. —FE

 


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