Tag: essarsteel

On Friday, the landmark Judgement in the Essar Steel case was passed by the Supreme Court of India, which gave priority to the financial creditors against the operational creditors. From the proceeds that will be generated from the liquidation process dues of the financial creditors will be released on a priority basis, and then the operational creditors will be paid.  Not only came the Essar ruling but also a new rule for the Bankruptcy law was notified. Ministry of Corporate Affairs has notified the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019. The new rules have been notified, especially for the insolvency proceeding against the Financial Service Providers (FSPs) and will not include banks. The central government framed the rules for the insolvency that is initiated against the FSPs and mentioned that an insolvency proceeding against the FSPs could only be taken only when an appropriate regulator makes the application.

The two-year long battle is now over and the Supreme court has finally decided the Essar Steel Insolvency case. In the ruling the Supreme Court has set aside the NCLAT judgement and said that the power to decide how to distribute the funds are with the Committee of Creditors. It also added that the operational creditors cannot be treated in the same was as the financial Creditor. This decision will be a test for the Insolvency and Bankruptcy law of India. Earlier NCLAT in its judgement has said that the fund that would come from the bid will be distributed equally among the financial and the operational creditors. However, Supreme court has set aside the NCLAT judgement. It is a test of the Insolvency code and it will be seen how the apex court will distribute the money that would come from the resolution proceed between the class of creditors with different securities and will also see on the validity of the fix time limit for the resolution.