COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA LIMITED THROUGH AUTHORISED SIGNATORY versus SATISH KUMAR GUPTA & ORS.

Citation: [2019] 16 S.C.R. 275 · Decided: 15-11-2019 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

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Judgment (excerpt)

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COMMITTEE OF CREDITORS OF ESSAR STEEL INDIA
LIMITED THROUGH AUTHORISED SIGNATORY
v.
SATISH KUMAR GUPTA & ORS.
(Civil Appeal No. 8766-67 of 2019)
NOVEMBER 15, 2019
[R. F. NARIMAN, SURYA KANT AND
V. RAMASUBSRAMANIAN, JJ.]
Insolvency and Bankruptcy Code, 2016 – Corporate
Insolvency Resolution Process – Power of Committee of creditors
to approve resolution plan - On facts, resolution plans for
Corporate debtor-Essar Steel India Limited – In CIRP of corporate
debtor, ArcelorMittal India was successful resolution applicant –
Resolution plan of ArcelorMittal specifically providing for an
upfront payment of INR 35,000 crores in order to resolve debts
amounting to INR 42,213 crores – Approval of final resolution plan
of Arcelor Mittal by Committee of Creditors – Initiation of several
proceedings – NCLT allowed the resolution plan – Challenge to,
before NCLAT – NCLAT held that there can be no difference
between a financial creditor and operational creditor in the matter
of payment of dues; thus, NCLAT 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;
NCLAT directed that each financial creditor (whether secured or
unsecured) with a claim equal to or more than INR 10 lakhs be
paid 60.7% of its admitted claim irrespective of their security
interest; that operational creditors with a claim of equal to or more
than INR 1 crore be paid 60.268% of their admitted claims; that
Committee of Creditors not empowered to decide the manner of
distribution to be made between one or other creditors; that s. 53
cannot be applied during the corporate resolution process but will
apply only at the stage of liquidation; and that the claims decided
by the resolution professional and affirmed by the Adjudicating
Authority or the Appellate Tribunal are final and binding on all
creditors – On appeal, held: Order by NCLAT which substitutes its
wisdom for the commercial wisdom of the Committee of Creditors
   [2019] 16 S.C.R. 275
275
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SUPREME COURT REPORTS
[2019] 16 S.C.R.
and also directs the admission of a number of claims which was
done by the resolution applicant, is set aside - CIRP of the
corporate debtor will take place in accordance with the resolution
plan of ArcelorMittal dated 23.10.2018, as amended and accepted
by the Committee of Creditors on 27.03.2019, as it has provided
for amounts to be paid to different classes of creditors by following
s. 30(2) and Regulation 38 of the Code.
Insolvency and Bankruptcy Code, 2016 – Resolution
professional – Role of, in the revival of the corporate debtor –
Held: Role of resolution professional is not adjudicatory but
administrative - Resolution professional manages the affairs of the
corporate debtor as a going concern from the stage of admission
of an application u/ss. 7, 9 or 10 - He appoints and convenes
meetings of the Committee of Creditors – He collects, collates and
finally admit claims of all creditors, which must then be examined
for payment, by the resolution applicant and be finally negotiated
and decided by the Committee of Creditors.
Prospective resolution applicant - Role of – Explained.
Insolvency and Bankruptcy Code, 2016 – Committee of
creditors - Role of, in the corporate resolution process – Held:
Committee of Creditors decides on whether or not to rehabilitate
the corporate debtor by means of acceptance of a particular
resolution plan – Committee of Creditors may approve a resolution
plan by a vote of not less than 66% of the voting share of the
financial creditors, after considering its feasibility and viability,
and various other requirements as may be prescribed by the
Regulations - Ultimately it is the commercial wisdom of the
Committee of Creditors which operates to approve the best
resolution plan, which is finally accepted after negotiation of its
terms by such Committee with prospective resolution applicants –
Furthermore, the 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 - Thus, commercial wisdom of this majority of creditors
is important which is to determine, through negotiation with the
prospective resolution applicant, as to how and in what manner
the corporate resolutio

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