The Supreme Court of India, by overruling the order of NCLAT, cleared and gave green light to the bid of ArcelorMittal for the debt ridden company Essar Steel for INR 42,000 Crores, making it the biggest takeover of a financially stressed asset in the India Corporate history.
The Supreme Court overruled the NCLAT judgment of 5th July, where it ordered that the Operational Creditors should be treated on par with the Financial Creditors while distributing the funds from the bid of ArcelorMittal, the apex court said that the NCLT or the NCLAT should not question the financial wisdom of the CoC and should not interfere with the decisions taken by it, it shall only interfere when the plan passed by the Committee is lacking on the judicial front.
The resolution plan of ArcelorMittal was passed by the CoC with a majority of 92.24%, this plan aimed at giving the financial creditors an amount of INR 41,987 Crore against the debt of INR 49,395 crore, while the operational creditors were only being given an amount of INR 214 crore against the debt of INR 4,976 crore. This means that the financial creditors were being given around 85% of their dues and on the other hand the operational creditors were only being given around 4.3% of their dues. And therefore the NCLAT re-distributed the proceeds payable under the approved resolution plan as per the method of calculation adopted by it so that all financial creditors and operational creditors be paid 60.7% of their admitted claims. This decision led the CoC to file an appeal against this order in the Supreme Court.
The Supreme Court overturned this order by saying:
“In our view, neither the adjudicating authority (NCLT) nor the appellate authority (NCLAT) has been endowed with the jurisdiction to reverse the commercial wisdom of the dissenting financial creditors and that too on the specious ground that it is only an opinion of the minority financial creditors.”
Judgment Link: CoC of Essar Steel Ltd. v. Satish Kumar Gupta and Ors.