{"id":222195,"date":"2019-11-16T12:46:46","date_gmt":"2019-11-16T07:16:46","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=222195"},"modified":"2019-11-20T13:14:17","modified_gmt":"2019-11-20T07:44:17","slug":"nclats-order-set-aside-in-essar-steel-insolvency-case-key-issues-on-corporate-insolvency-resolution-process-answered","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2019\/11\/16\/nclats-order-set-aside-in-essar-steel-insolvency-case-key-issues-on-corporate-insolvency-resolution-process-answered\/","title":{"rendered":"NCLAT’s order set aside in Essar Steel Insolvency case; Key issues on Corporate Insolvency Resolution Process answered"},"content":{"rendered":"

Supreme Court<\/strong><\/span>: The 3-judge bench of RF Nariman, Surya Kant and V. Ramasubramanian, JJ has set aside the NCLAT order dated 04.07.2019 in the Essar Steel India insolvency case and has held,<\/p>\n

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\u201cThe NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the aforesaid judgment, must therefore be set aside.\u201d<\/p>\n<\/blockquote>\n

NCLAT had, in the impugned order, held that in a resolution plan there can be no difference between a financial creditor and an operational creditor in the matter of payment of dues, and that therefore, financial creditors and operational creditors deserve equal treatment under a resolution plan. Accordingly, the NCLAT has 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.<\/p>\n

The present appeals and writ petitions were an aftermath of this Court\u2019s judgment dated 04.10.2018 in ArcelorMittal India Private Limited v. Satish Kumar Gupta, (2019) 2 SCC 1<\/a><\/span><\/strong>.<\/p>\n

The Court also answered some important questions which have been e<\/span>laborated as follows:<\/strong><\/span><\/h4>\n

Role of Resolution Professional<\/strong><\/span><\/p>\n

Resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7, 9 or 10 of the Code till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional.<\/p>\n

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\u201cAnother very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors.\u201d<\/p>\n<\/blockquote>\n

Role of the prospective resolution applicant<\/strong><\/span><\/p>\n

The prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the admission of an application under section 7, 9 or 10 of the Code. For this purpose, it has a right to receive information contained in the information memorandum as well as the evaluation matrix mentioned in Regulation 36-B.<\/p>\n

Role of Committee of Creditors<\/strong><\/span><\/p>\n

Since it is the commercial wisdom of the Committee of Creditors that is to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the aforesaid Committee in its discretion.<\/p>\n

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\u201cThe Committee of Creditors does not act in any fiduciary capacity to any group of creditors. On the contrary, it is to take a business decision based upon ground realities by a majority, which then binds all stakeholders, including dissentient creditors.\u201d<\/p>\n<\/blockquote>\n

The decisions relating to management of the corporate debtor cannot be taken without the prior approval of at least 66% of the votes of the Committee of Creditors.<\/p>\n

Constitution of a sub-committee by the Committee of Creditors<\/strong><\/span><\/p>\n

Sub-committees cannot be constituted for<\/span><\/strong>:<\/em><\/p>\n