"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.
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