SC order on Essar validates credibility of IBC process: FM

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SME Times News Bureau | 16 Nov, 2019
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.