Supreme Court Puts Essar Steel Sale To ArcelorMittal On Hold

The Supreme Court on Monday ruled that status quo should be maintained in the Essar Steel insolvency case.

The interim order by a bench headed by Justice Rohinton Fali Nariman came on a plea filed by the committee of creditors of Essar Steel against the judgment of the National Company Law Appellate Tribunal.

In its judgment on July 4, NCLAT upheld ArcelorMittal SA’s bid for Essar Steel while making changes over the distribution of claims between various creditors. Overruling the committee of creditors’ decision on distribution of claims, NCLAT held the CoC has no role in distribution of claims from ArcelorMittal’s resolution plan and that its role is limited to deciding viability and feasibility of the bid. The appellate tribunal had also held that the committee comprises financial creditors and letting them decide on distribution of claims will be a conflict of interest.

There’s a need to look into the question that once the committee of creditors in its commercial wisdom has taken a decision, then how far can it be altered by a court or tribunal, said Justice Nariman. The NCLAT cannot act like a resolution professional and distribute funds, the bench said.

The NCLAT in its judgment had ordered that all operational creditors with claims above Rs 1 crore will get around 60 percent of their claim and all financial creditors with above 1 crore of dues will also get 60 percent percent of their claims. Creditors with claims of less than Rs 1 crore will receive 100 percent of their dues, according to the NCLAT order.

The Supreme Court said it will hear the Essar Steel insolvency case in detail and posted the matter for hearing on August 7.