SC order on Essar Steel validates credibility of IBC: FM Sitharaman

FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Friday hailed the long-pending resolution of Essar Steel finally being cleared with a Supreme Court order, saying credibility and substance and nature of the IBC resolution process has been "re-imposed".

"This decision has very clearly re-imposed the IBC (Insolvency and Bankruptcy Code), the process with which the IBC works and the resolution which the IBC enables. And in this case, by the verdict of the today, the credibility and substance and nature of the IBC resolution process has been re-imposed.

"And therefore I think many of the lingering questions which were in the minds of many people concerned about IBC will all be now answered. Therefore the process could not be better," she said on the Supreme COurt order on Essar Steel case where the supremacy of financial creditors has been established and a long-drawn process has come out with resolution for banks.

SBI Chairman Rajnish Kumar too was impressed by the decision on Essar Steel India judgment by the Supreme Court.

"The Hon'ble Supreme Court of India, in a landmark judgement in the case of Essar Steel India Ltd has upheld that the ultimate discretion on distribution of funds is with the Committee of Creditors. It has held that the secured and unsecured financial creditors are differentiated when it comes to amounts to be paid under a resolution plan, together with what dissenting secured or unsecured financial creditors are to be paid. It has been held that the COC can distribute amongst the secured financial creditors as per their commercial wisdom as COC is not restricted from classifying creditors as financial, operational, secured or unsecured.

"This much-awaited judgement also settles to rest numerous points of law under the Insolvency and Bankruptcy Code which were tested in various courts. This should significantly reduce the scope for long drawn litigations under IBC and would eventually lead to faster resolutions of stressed assets," he said.

The Supreme Court on Friday cleared the way for global steel giant ArcelorMittal's Rs 42,000 crore acquisition of debt-laden Essar Steel, after a two-year-long legal battle that tested India's bankruptcy law. The court set aside a ruling of the National Company Law Appellate Tribunal and said that operational creditors cannot be on a par with financial creditors of a bankrupt company.


Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel