SC sets aside NCLAT order, clears decks for ArcelorMittal to take over Essar Steel

The Supreme Court Friday set aside a NCLAT order which gave equal rights to the secured and unsecured creditors during the insolvency proceedings of debt-ridden Essar Steel, clearing the decks for it takeover by Lakshmi Mittal-led ArcelorMittal.

Setting aside the National Company Law Appellate Tribunal (NCLAT) order, a 3-judge headed by Justice R F Nariman, said the two set of creditors will be treated differently during the insolvency proceedings and taking over of a debt-ridden firm by another company.

There is no principal of equality between secured and unsecured creditors, said the bench, also comprising Justices Surya Kant and V Ramasubramanian.

"The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors (CoC) and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside," said the bench.

The NCLAT had said that everybody (secured and unsecured creditors) will get 60.7 per cent of their dues in the event of takeover of a debt-ridden company by another firm under the Insolvency and Bankruptcy Code (IBC), said senior advocate Rakesh Dwivedi, who represented one of the parties in the apex court in the case.

"The appeals filed by the CoC of Essar Steel Limited and other Civil Appeals are allowed. The impugned NCLAT judgment is set aside," the top court said.

Reacting to the verdict, Essar Steel said: "We wish ArcelorMittal and Nippon Steel the very best on their entry into the Indian market. They are acquiring a world-class facility in a market that has a long runway for growth."