Essar Steel Case: SC Rejects NCLAT Order, Gives Primacy to Banks

The top court also relaxed the timeline of 330 days to find a resolution plan.

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The Essar Group headquarters in Mumbai. Image used for representational purposes.
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The Supreme Court on Friday, 15 November set aside the 4 July order of the NCLAT approving ArcelorMittal's Rs 42,000-crore bid for acquiring debt-laden Essar Steel.

A bench headed by Justice RF Nariman quashed the National Company Law Appellate Tribunal (NCLAT) order which had given financial creditors equal status with operational creditors in the distribution of ArcelorMittal's bid amount.

The Supreme Court has upheld the primacy of Committee of Creditors (CoC) and stated that the NCLAT cannot interfere with the commercial decisions taken by CoC.

The Committee of Creditors (COC) consists of banks.

The top court also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code.

The deadline was introduced by an amendment to the Insolvency and Banckrptcy Code. The law itself specifies a 270 day deadline for completion of insolvency proceedings, failing which liquidation is triggered. But the court's decision has allowed for litigation periods to be reduced from the 270-day timeline.

“It shall be open for the adjudicating authority to extend the time in exceptional cases,” said Justice Nariman, according to BloombergQuint.

The bench clarified that financial creditors enjoy primacy and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.

(With inputs fro, PTI, BloombergQuint)

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