The National Company Law Appellate Tribunal has modified and approved the Resolution Plan of ArcelorMittal India Private Limited in the Corporate Insolvency Resolution Process of Essar Steel India Limited. Previously, the NCLT, Ahmedabad had approved the Resolution Plan of ArcelorMittal as approved by the Committee of Creditors of Essar Steel India Limited.
Standard Chartered Bank, Prashant Ruia and certain banks among various other appellants had approached the NCLAT seeking various reliefs against the Order of the NCLT approving the resolution plan in terms of Section 31 of the Insolvency and Bankruptcy Code, 2016.
The following are the key-highlights of the Judgment:
1. Issue of Eligibility of ArcelorMittal India Pvt. Ltd.
On the issue of eligibility of AMIPL in terms of Section 29A as raised on behalf of Prashant Ruia and Essar Steel Asia Holdings Limited (the shareholder of ESIL) the NCLAT has held that these issues cannot be re-agitated at this point and are barred by res judicata.
2. Powers of Committee of Creditors
The NCLAT has held that the CoC does not have the power to constitute a core committee or sub-committee or to delegate the duties to any such committee. Further, the CoC has no role to play in the matter of distribution of amount amongst the creditors.
3. Role of the Committee of Creditors
On the role of CoC the NCLAT has laid down the following essentials:
i. The CoC needs to rescue all viable corporate debtors and close unviable ones.
ii. Commercial decisions of the CoC are not ordinarily open to any analysis, evaluation or judicial review by the Adjudicating Authority or the Appellate Authority and hence not justiciable.
iii. The selection and approval of the best 'Resolution Plan' requires two abilities, namely, the ability to restructure the liabilities and the ability to take commercial decisions.
iv. The CoC shall take commercial decisions which further the objectives of the IBC and do not allow the interests of Financial Creditors to overshadow the interests of the Corporate Debtor or the other Creditors.
v. CoC must not discard a resolution plan that maximizes the value of the assets of the 'Corporate Debtor' just because it yields realizations in future for Financial Creditors or yields relatively lower realization for them.
The NCLAT also held that commercial decisions are not amenable to precise mathematical formula. It requires considerable commercial dexterity and acumen. The CoC must enhance its capacity to distinguish a viable Corporate Debtor from an unviable one.
4. On classification between a class of creditors
The NCLAT has laid down that the financial creditors cannot be classified into any further class. It has held that 'Financial Creditors' cannot be discriminated on the ground of 'Secured' or 'Unsecured Financial Creditors' for the purpose of distribution of proposed amount amongst stakeholders in the 'Resolution Plan' by the 'Resolution Applicant'.
5. Applicability of Section 53 of IBC
The NCLAT while adjudicating upon the distribution of financial package between the various stakeholders has held that the reliance on Section 53 cannot be made.
6. Final distribution and the resolution plan of AMIPL
The NCLAT after giving a detailed mathematical explanation and determining the amount of money which is to be received by financial creditors. The NCLAT stated that instead of rejecting the Resolution Plan it modified the plan to safeguard the rights of the Operational Creditors and other Financial Creditors.
7. Profit generated during Corporate Insolvency Resolution Process
The NCLAT has held that the profit generated during the resolution process should be distributed amongst the financial creditors and the operational creditors on a pro-rata basis and it does not belong to the resolution applicant.
8. Disputed claims and its remedy
ArcelorMittal was represented by Karanjawala & Co. Lead by Ms. Ruby Singh Ahuja, Senior Partner and L&L Partners.
Karanjawala & Company is an exclusive full-service litigation firm founded in the year 1983 by Mr. Raian Karanjawala and Mrs. Manik Karanjawala. The Firm presently operates out of three offices in New Delhi with 9 partners and approximately 100 advocates. The firm has over the years come to dominate the litigation landscape in India and has serviced a wide variety of diverse clients from Prime Ministers to Captains of industry to the biggest corporate houses and the largest media companies. It is equally at ease handling the day to day cases of the ordinary litigant as it is handling the legal disputes of royal families. Though historically its practice began with a predominant Supreme Court and High Court emphasis, it has today expanded in a manner which ensures that it has a presence in all the subordinate courts and tribunals in the National Capital Region (NCR) and its services are often enlisted to handle litigation on a pan–India basis. The Firm features in over 450 reported judgments of the Supreme Court and has filed and dealt with approximately 23,500 plus matters till date. It has till date been recognized as the No. 1 Litigating firm with over 150 awards.
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