Supreme Court set aside the e NCLAT judgement and said that the ultimate discretion on distribution of funds was with the Committee of creditors. CoC consisted of banks, NCLAT had earlier stated the funds should be distributed between financial creditors and operational creditors.
ArcelorMittal already won the bid for Essar Steel, having got the NCLT approval for its Rs 42,000 crore bid. The Supreme Court order now paves the way for the world’s largest steelmaker to begin the acquisition process, and finally get a presence in what is still among the fastest growing steel markets in the world.
This is especially relevant now, given that the steel industry overall is going through a slump, and ArcelorMittal has been forced to cut production in many of its facilities globally.
The court has held that it is the bank’s decision to maximise the value of he corporate debtor and added that the CoC should also balance the interests of all stakeholders.
“The judgement is like a breath of fresh air, and of economic freedom. This is one of the most important, if not the most important, judgement in the history of bankrupcty law,” said Ashwin Bishnoi, Partner in the Corporate and Commercial Practice Group in law firm Khaitan & Co. The finer print of the order, he added, needs to be studied.
“It’s a big win for lenders,” added an executive from the industry.
“Finally, we have parity with international standards. Nowhere, are unsecured creditors treated on part with secured creditors,” added the executive.
The NCLT cannot interfere with the commercial decisions taken by the COC and that, if the NCLT finds that legal parameters are not met, it can send it back to COC but not tinker with the plan.
The reason given by COC may be looked at by adjudicating authority to limited extent.
The Supreme Court also relaxed the timeline of 330 days prescribed in the IBC. It said that the NCLAT was open to extend the timeline, if required.
“The Court has made it clear that 330 days is not mandatory. And it gives room whenever there is a bona fide or exceptional reason to extend the time frame,” said Bishnoi. World over, it takes about two-and-a-half years so cases to be settled, he added.
Click here to read full judgement: 24417_2019_4_1501_18158_Judgement_15-Nov-2019
Source: Moneycontrol and By Own Author, November 15, 2019