Essar Steel Insolvency: SC sets aside NCLT order, upholds rights of lenders

The Supreme Court on Friday allowed a petition filed by Committee of Creditors of Essar Steel India and set aside the National Company Law Tribunal (NCLT) order which had provided for an equal distribution of proceeds between financial and operational creditors.

A bench headed by Justice Rohinton Fali Nariman while upholding the rights of lenders in the Essar Steel insolvency case held that the ultimate discretion of distribution of claims lies with the Committee of Creditors.

"No doubt the ultimate discretion on distribution is with Committee of Creditors (CoC) but its decision should also balance the interests of all stakeholders," the bench stated.

The apex court said that NCLT cannot interfere with the commercial decisions taken by the CoC.

The court also relaxed the timeline of 330 days to find a resolution of the stressed asset as prescribed in Insolvency and Bankruptcy Code (Amendment) Bill 2019.

The top court's order came against July 2019 judgement of NCLT ordering all creditors, operational and financial, to be treated on par in sharing the proceeds from the winning bid from the sale of ailing Essar Steel.

ArcelorMittal has won the bid for acquiring Essar Steel during the insolvency process.

The NCLT has ruled that the money, over 57, 000 crore was to be shared equally between all the creditors.

The committee of creditors and some banks had challenged the NCLAT order in the Supreme Court.

Arcelor which was denied the operating profits from Essar Steel pending resolution has also challenged the order.