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.

CASE STUDY ON ESSAR STEEL – A NEVER ENDING LITIGATION
PART-I

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.

TIMELINE

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.

MAJOR ISSUES IN THE MATTER

  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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions