The Supreme Court on Tuesday started hearing the arguments in the Essar Steel insolvency case after Committee of Creditors (CoC) had sought quashing of the National Company Law Appellate Tribunal (NCLAT) order which had given financial creditors equal status with operational creditors in the distribution of the ArcelorMittal's bid amount.
On July 22, the top court had put on hold the sale of Essar Steel to ArcelorMittal as it agreed to hear the appeal filed by lenders against the NCLAT order, saying it would like to settle the issue "once and for all".
On August 1, Parliament had approved changes in the three-year-old IBC providing greater clarity over the distribution of proceeds of the auction of loan defaulting companies, with the Lok Sabha passing the Bill with a voice vote.
The Insolvency and Bankruptcy Code (Amendment) Bill 2019 gives CoC of the loan defaulting company explicit authority over the distribution of proceeds in the resolution process and fixes a firm timeline of 330 days for resolving cases referred to the IBC.
Among others, the approved resolution plan would be binding on central and state governments as well as various statutory authorities.
Essar Steel was auctioned under the new IBC to recover Rs 54,547 crore of unpaid dues of financial lenders and operational creditors. In its July 4 order, the NCLAT had said that financial creditors will get 60.7 percent of their admitted claims of Rs 49,473 crore, almost same as operational creditors.
The operational creditors with an admitted claim amount of less than Rs 1 crore would get 100 percent, while above Rs 1 crore would get 60.26 percent and workmen and employees would get 100 percent.
The tribunal had said that the CoC will have no role in the distribution of Rs 42,000 crore and allowed claims of the operational creditors such as Dakshin Gujarat, Gujarat Energy, Bharat Petroleum, Indian Oil, GAIL, ONGC, and the NTPC.
ArcelorMittal had told the NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring Essar Steel under the insolvency process.
The tribunal said the apex court had settled the issue of eligibility of ArcelorMittal India and could not be re-opened before the Appellate Authority at a stage where the 'Resolution Plan' approval was being considered.