In a big win for ArcelorMittal, Supreme Court on Friday set aside NCLAT judgment, approving its Rs 42,000 crore bid for acquiring debt-struck Essar Steel. The July 4 order had provided for equal distribution of proceeds between financial and operational creditors in the distribution of ArcelorMittal’s bid amount. Now, the takeover would take place according to the October 23, 2018, resolution plan of ArcelorMittal.The judgment by a bench headed by Justice R F Nariman also pronounced that there is no doubt that the ultimate discretion on distribution of proceeds is with the committee of creditors (CoC).
The SC ruling can be seen as a win for lenders too as the July order by NCLAT had ruled that the fund-distribution should be on equal terms between all creditors ranging from financial to operational lenders with claims over Rs 1 crore to recover 60.7 per cent of their total dues. The ruling had implied a steep cut for financial creditors as against 89.8 per cent according to the CoC’s revised plan for the distribution of funds. SBI, ICICI Bank, Canara Bank, Corporation Bank, PNB, IDBI, and Bank of India are among the major creditors.
In addition, the apex court also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code (IBC). The top court also said that financial creditors enjoy primacy and the adjudicating authority cannot interfere with the decision approved by the committee of creditors. Essar Steel’s sale was put on hold by ArcelorMittal on July 22 after it decided to hear the petition filed by the lenders opposing the NCLAT order. The Essar Steel case was admitted to NCLT in August 2017 for insolvency proceedings post its identification by the RBI in its first list of 12 big loan defaulters.