SC in the case of Committee of Creditors of Essar Steel India Limited

Case Covered:

Committee of Creditors of Essar Steel India Limited

Versus

Satish Kumar Gupta & Ors.

Facts of the case:

Given the aforesaid facts, Shri Sibal’s submissions on behalf of Standard Chartered Bank, that the offer made by ArcelorMittal of payment of INR 42,000 crores as upfront in order to pay 100% principal outstanding of secured financial creditors of the corporate debtor cannot be accepted. Given that Standard Chartered Bank was reclassified as a secured financial creditor of the corporate debtor only on 10.09.2018 and that the aforesaid upfront payment of INR 42,000 crores would include the principal amount payable to Standard Chartered Bank as well, we have seen how in the course of negotiation, the vast majority of financial creditors have ultimately decided that Standard Chartered Bank will only get an amount based on its security interest, which was accepted by ArcelorMittal. Shri Sibal also argued that the final resolution plan ultimately offered a sum of INR 39,500 crores instead of INR 42,000 crores, being a minimum upfront payment from which it was possible to negotiate upwards but not downwards. We cannot arrive at the conclusion that the acceptance of the resolution plan by the majority of the Committee of Creditors should be set aside on this score, inter alia, for the reason that Shri Sibal assured us that he was not attacking the acceptance of the revised plan but the only distribution of amounts payable under the said plan. This being so, it is also not possible to accept the submission of Shri Sibal, that “feasibility and viability” of a resolution plan will not include distribution of the amount of debt under the said plan. It is also not possible to accept Shri Sibal’s submission that the resolution plan must itself provide for distribution inter se between secured financial creditors. It is enough that under the Code and the Regulations, the resolution plan provides for the distribution of amounts payable towards debts based upon a classification of various types of creditors. This both the original plan, as well as the negotiated plan of ArcelorMittal, have already done, as has been seen by us hereinabove, both plans containing the amount to be paid to workmen separately, operational creditors of INR 1 crore and less separately, operational creditors of INR 1 crore and over separately and financial creditors, subdivided into secured and unsecured as sub-classes, separately. All that was left for distribution by ArcelorMittal was distribution inter se between secured financial creditors which was then done by a majority of 92.24%, as has been seen above based upon the value of their respective security interests. Therefore, the allegation that the Committee of Creditors relieved ArcelorMittal from the solemn offer made before the Supreme Court by reducing the offer amount of INR 42,000 crores by INR 2,500 crores so that ArcelorMittal could acquire the debts of OSPIL, is again a matter for negotiation being a business decision taken by the Committee of Creditors with ArcelorMittal. In any case, ultimately INR 35,000 crores were upped to INR 42,000 crores, it is made clear in the final resolution plan that upfront payment of INR 42,000 crores is a committed amount, even if working capital adjustment turns out to be below INR 2,500 crores. 

The observations & judgement of the court:

The appeals filed by the Committee of Creditors of Essar Steel Limited and other Civil Appeals are allowed. The impugned NCLAT judgment is set aside, except insofar as Civil Appeal No. 6409 of 2019, Civil Appeal No. 7266 of 2019, Civil Appeal No. 7260 of 2019 are concerned, which are dismissed. Insofar as Civil Appeal No. 6266 of 2019 and Civil Appeal No. 6269 of 2019 is concerned, the Appeals are partly allowed in terms of this judgment. The Writ Petitions are disposed of in terms of the judgment. It is made clear that the CIRP of the corporate debtor in this case will take place in accordance with the resolution plan of ArcelorMittal dated 23.10.2018, as amended and accepted by the Committee of Creditors on 27.03.2019, as it has provided for amounts to be paid to different classes of creditors by following Section 30(2) and Regulation 38 of the Code. 

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