Bench Strength – 3 ( R.F. Nariman, Surya Kant, V. Ramasubramanian JJ )
Date of Judgment – 15.11.2019
Facts of the case-
Standard Chartered Bank [SCB] had provided a loan to Essar’s fully owned foreign subsidiary, Essar Steel Offshore Limited (“ESOL”). Essar was a guarantor to this loan. Accordingly, SCB had issued a demand notice to Essar on ESOL’s failure to pay the amount due to them. Since Essar failed to respond to the demands of SCB, it sought to initiate the Corporate Insolvency Resolution Procedure [CIRP] and proposed a name for an Interim Insolvency Resolution Professional (“IRP”). SBI, unlike SCB, had been a part of the Joint Lenders’ Forum (“JLF”) whereby SBI had been authorized by other Banks of the JLF to file the CIRP Application. Based on JLF recommendations, SBI proposed an IRP. Essar did not raise any objections regarding the existence of the debt. It was admitted that they were in default, but they claimed that they were not wilful defaulters. Essar also contended that the application ought not to be admitted as prejudice would be caused to the company and its employees. In March 2019, National Company Law Tribunal (NCLT) approved global steel-giant ArcelorMittal’s bid for Essar Steel. The Committee of Creditors (CoC) approved the resolution plan offered by the ArcelorMittal. Under the resolution plan, ArcelorMittal offered an advance cash payment of about ₹42,000 crore to the financial creditors and capital infusion of ₹8,000 in the next few years. However, the offer did not have much for operational creditors to Essar Steel. Continue reading →