With the much awaited-judgment in the Insolvency and Bankruptcy regime; the Supreme Court of India (hereinafter “SC” or “apex court”) cleared off the long-standing confusions encompassing the Insolvency and Bankruptcy Code, 2016 (hereinafter the “Code” or “IBC”) with its landmark in Committee of Creditors of Essar Steel Ltd. v. Satish Kumar Gupta & Orsi on November 15, 2019.
The judgment came at a point when the debacle and dilemma of rights between Financial Creditors (hereinafter “FC”) and Operational Creditors (hereinafter “OC”) stood at a stake. The SC, with its landmark judgment paved a way for upholding the rights of FCs over OCs, and many other uncertainties in the present-day Code.
In light of this, the article will present a word picture of the landmark judgment of Essar steel vis-à-vis Insolvency and Bankruptcy jurisprudence in India and the way forward.
BACKGROUND AND FACTS OF THE CASE
The case between CoC of Essar Steel v. Satish Kumar Gupta, in a series of petitions filed in the apex court finally paved way for its final verdict on November 15, 2019. The judgment was passed by a Bench of Justices Rohinton Nariman, Surya Kant and V Ramasubramanian. The case started almost 2 years back in a bid to resolve the dispute between the debt-laden Essar Steel and its Committee of Creditorsii (hereinafter “CoC”) has taken many twists and turns.
THE NCLT’s DECISION (2017)
The case took its first spark in August 2nd, 2017, when the assets of Essar Steel led company was declared insolvent owing ₹54,547 crores to its creditors (both financial and operational). The company was identified as one of the biggest corporate defaulters by Reserve Bank of India (RBI). The creditors of the company led by a consortium of Standard Chattered and State Bank of India (including Numetal, Vedanta, JSW Steel and others) filed an insolvency application under Section 7 for the Corporate Insolvency Resolution Process (hereinafter “CIRP”) at the Ahmedabad Bench of National Company Law Tribunal (hereinafter “NCLT”), and the same was admitted. • The winning bid by ArcelorMittal, (led by Lakshmi Mittal in partnership with Nippon Steel and Sumitomo Corporation) set off the final race to take over the assets of the debt-laden Essar steel by paying of ₹50,000 Crores in toto (including equity infusion of ₹8,000 crores).
• The resolution plan was approved by the NCLT (Ahmedabad Bench) in March 2019, but was challenged by the OCs (Dakshin Gujarat, Gujarat Energy, Bharat Petroleum, Indian Oil, GAIL, ONGC, and the NTPC), that they were being paid only 8% from the RP whereas FCs recovering 92.5% from the recovered amount.
• The bid was also challenged by Standard Chartered Bank as well as by the directors of Essar Steel, as being violative.