Goliath v. Goliath: The Supreme Court verdict putting an end to the battle for Essar Steel

By a judgment dated November 15, 2019, the Supreme Court of India has put an end to the long drawn out battle for the acquisition of steel giant - Essar Steel India Limited (“Essar Steel”) under India’s newly introduced insolvency legislation.

Essar Steel’s overdue debt of about INR 550 billion (approximately USD 7.6 billion) was the largest among the companies being resolved under the (Indian) Insolvency and Bankruptcy Code, 2016 (“IBC”).

The judgment also clarifies several key issues, which should aid the resolution of future cases under the IBC, such as:

(i)    The principle of “equality” could not be interpreted to mean that all creditors (irrespective of their security interest or their status as operational or financial creditor) would be entitled to equal recovery under a resolution plan.

(ii)   All “undecided” claims of the corporate debtor stand extinguished once a resolution plan is accepted.

(iii)  The resolution plan can provide for extinguishment of the right to subrogation in respect of any amounts paid under the guarantees extended in respect of the debt of the corporate debtor. 

(iv)  The timelines prescribed under the Insolvency and Bankruptcy Code (Amendment) Act, 2019 for completion of the corporate insolvency resolution process are not mandatory and relief may be given in exceptional cases where the failure to adhere to such timelines could not be attributed to any fault of the litigants.

S&R Associates represents ArcelorMittal in its proposed acquisition of Essar Steel and related proceedings.

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