The Supreme Court on Friday paved the way for ArcelorMittal takeover of debt-ridden Essar Steel for Rs 42,000 crore and set aside the July 4 NCLAT order giving equal status to financial creditors and operational creditors.
A bench headed by Justice R F Nariman clarified that financial creditors enjoy primacy over operational creditors and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.
The top court said that the adjudicating authority can send back the resolution plan to the committee of creditors (COC) for implementation in accordance with the guidelines but cannot change the commercial decision taken by the COC.
The bench also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code.
The bench said it would be open for the the adjudicating authority to maintain the timeline in exceptional cases.
The bench said that the COC resolution plan must balance the interest of all stakeholders.
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The apex court had on July 22 ordered status quo in the Essar insolvency case.
The verdict came on a plea of the committee of creditors challenging NCLAT's order of July 4 in which it had approved steel tycoon Lakshmi Mittal-led ArcelorMittal's Rs 42,000-crore bid for the acquisition of Essar Steel after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.
The National Company Law Appellate Tribunal (NCLAT) had, however, given operational creditors equal status as lenders in the distribution of the ArcelorMittal's bid amount among the creditors of Essar Steel.
Essar Steel was auctioned under the new Insolvency and Bankruptcy Code (IBC) to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors.