India: The Saga Of Unending Resolution Process Under IBC - Part I

Last Updated: 8 October 2018
Article by AMLEGALS  

This is a case study on the Resolution process under IBC. The Part-I deals with timeline for better understanding of this entire process.


The resolution proposal during the CIRP in ESSAR Steel under Insolvency and Bankruptcy Code has undergone many rounds of litigations.

It is known for one bid after the other, bids by heavy weight companies including Arcelor Mittal, Numetal and Vedanta and high profile lawyers like Mr. Harish Salve, Mr. Mukul Rohtagi, Dr. Abhishek Manu Sanghvi, etc were involved in this CIRP.

This part deals with various incidental issues and court room battles which it went through.


15th MAY 2017: Banking Regulation (Amendment) Ordinance was passed. It authorized the RBI to initiate proceeding of bankruptcy proceedings through the banks against defaulters.

13th JUNE 2017: RBI identified first 12 defaulters including ESSAR Steel India Ltd.

16th JUNE 2017: RBI issues a press release to initiate insolvency proceedings against the 12 defaulters through the IBC, 2016.

27th JUNE 2017: Insolvency proceedings initiated against ESSAR Steel in NCLT.

4th JULY 2017: ESSAR Steel moves to Gujarat High Court against the insolvency proceedings. High Court issues notice to RBI.

5th JULY 2017: Standard Chartered Bank appeals to Gujarat High Court against the deferment of insolvency proceedings.

7th JULY 2017: Gujarat High Court restrained the NCLT from conducting any further proceeding against ESSAR till they hear RBI's side.

17th JULY 2017: Gujarat High Court disposes off the Petition of ESSAR & observes that RBI press releases should not 'direct or guide judicial/quasi judicial authorities'.

18th JULY 2017: ESSAR seeks time in NCLT to file objections.

24th JULY 2017: ESSAR challenges SBI application in NCLT on technical grounds.

2nd AUGUST 2017: NCLT Ahmedabad bench admits insolvency petition against ESSAR Steel & appoints IRP.

20th OCTOBER 2017: Expression of Interests was invited by RP.

(6 Companies bid for Essar Steel but major Companies were Arcelor Mittal, Numetal and Vedanta. However only 2 i.e. Arcelor Mittal and Numetal could bid successfully)

23rd NOVEMBER 2017: Amendment was made under IB Code and Clause 29(A) was introduced.

(Section 29A restricted certain persons who are not eligible to submit the Resolution Plan and become the Resolution Applicant.

A proviso was also added in Section 30 of the IB Code which states that where the resolution applicant is ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by the COC for such period, not exceeding 30 days, to make payment of overdue amounts in accordance with the proviso to clause (c) of section 29A.)

12th FEBRUARY 2018: First round of bids submitted by Numetal, Arcelor Mittal (Numetal had offered Rs 19,000 crore and Arcelor Mittal offered 32,000 crore)

In MARCH 2018: RP holds that the bids made by Numetal and Arcelor Mittal are ineligible.

20th MARCH 2018: Numetal challenges rejection of bid in NCLT Ahmedabad.

26th MARCH 2018: Arcelor Mittal challenges disqualification in NCLT.

2nd APRIL 2018: While matter was in NCLT, 2nd Round of Bids were Invited. Arcelor Mittal - Nippon Steel, Numetal - JSW Steel, Vedanta Group made their bids. (Numetal increased its bid to Rs 37,000 Crore in second round)

19th APRIL 2018: NCLT Ahmedabad however instructed the RP to rather re-examine first round of bids afresh due to the reason that provisions of IB Code were not meticulously followed by RP while rejecting bids of first round.

26th APRIL 2018: Instead both Numetal and Arcelor Mittal filed appeals in NCLAT challenging the disqualification of their 1st Round of Bids.

14th MAY 2018: Arcelor Mittal deposited Rs 7,000 Crore in Escrow Account at SBI, London to repay dues of KSS Petron & Uttam Galva Steels on the condition that Numetal be disqualified.

17th MAY 2018: Numetal offers Rs 37,000 Crore for ESSAR Steel but they also showed their willingness to offer Rs. 42,000 crore.

The First Bid was already open and they knew that Arcelor Mittal had offered 32,000 Crore.

22nd MAY 2018: NCLAT orders status quo on insolvency proceedings against ESSAR Steel.

5th JULY 2018: Arcelor Mittal seeks Disqualification of Numetal Bid for ESSAR Steel.

11th JULY 2018: ESSAR steel Lenders urge NCLAT to speed up the resolution plan in as much as the Corporate Debtor was incurring losses on daily basis because of non-approval of the Resolution Plan.

18th JULY 2018: NCLAT after completing the hearing reserved its Order.

7th SEPTEMBER 2018: NCLAT held that the Numetal Second Bid is eligible but also gave two days time to Arcelor Mittal to clear all the dues till 11th September, 2018 to become eligible.

Supreme Court - Arcelor Mittal filed an appeal in the Supreme Court and the matter came to be heard on 12th September 2018.

12th September 2018: Arcelor Mittal agreed to clear the dues of Rs 7,000 Crore only if it is declared the highest bidder for ESSAR Steel. In fact, the said amount was already lying in the Escrow Account.

Also, Arcelor Mittal increased its bid value for ESSAR Steel to Rs 42,000 Crore, to stay ahead of Numetal.

Senior Advocate Mr. Harish Salve, appearing for Arcelor Mittal, argued:

  • Arcelor had "deep pockets" and had made provisions for the money. But we can't pay for Uttam Galva, KSS Petron under the law. It will immediately become taxable income in the hands of the company if paid without any consideration.
  • Arcelor Mittal is ready to pay but we have to arrive at a structure as it is not as easy as saying. Both are listed companies and there are regulatory hurdles in payment. Sufficient provision for payment of debt should be treated at par with payment.
  • Also, NCLAT has not provided anything as to how Arcelor Mittal has to pay the amount to both the companies.

Justice Nariman agreed to the contention of Arcelor Mittal and observed that "The NCLAT is not an overseeing authority."

14th September 2018: Mr. Salve submitted that Arcelor Mittal has no dispute with the offer made by Vedanta.

18th September 2018: The Apex Court asked Numetal to establish that there was "subterfuge" by rival bidder Arcelor Mittal in divesting its shares in two debt-ridden firms before bidding for ESSAR Steel. The onus was casted upon Numetal to show as to how Arcelor Mittal was the active promoter of Uttam Galva.

Numetal argued in the Apex Court that Apex Court could only examine the eligibility and not the resolution plans.

Senior Advocate Mr. Mukul Rohatgi, appearing for Numetal, accused Arcelor Mittal of cheating Indian banks of Rs 7,000 crore owed by Uttam Galva Steels Ltd. and KSS Petron by selling its shares just before bidding in a susceptible manner.

4th OCTOBER 2018: The Supreme Court finally decided that Both Arcelor & Numetal are not eligible.

However, after invoking Article 142 gave additional 2 weeks time to both the bidders to remove the ineligibility by paying the dues and further 6 weeks time was provided to the COC for reconsideration of the Resolution Plan.


  1. Whether Arcelor Mittal is eligible to become the Resolution Applicant?
  2. Whether Numetal is eligible to become the Resolution Applicant?
  3. Whether the 1st Bid will be considered as the Valid Bid?
  4. Whether the 2nd Bid will be considered as the Valid Bid?
  5. Whether the Extension of Time Period beyond 270 days will be allowed?

In Part–II of this case study, the guidelines and laid down ratio by Supreme Court will be discussed in detail.

This content is purely an academic analysis under "Legal intelligence series".

© Copyright AMLEGALS.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Reade should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

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