Committee of Creditors of Essar Steel India Limited through Authorised Signatory vs Satish Kumar Gupta & Ors.

Insolvency and Bankruptcy Code, 2016 – Resolution professional – Role of, in the revival of the corporate debtor – Held: Role of resolution professional is not adjudicatory but administrative - Resolution professional manages the affairs of the corporate debtor as a going concern from the stage of admission of an application u/ss. 7, 9 or 10 - He appoints and convenes meetings of the Committee of Creditors – He collects, collates and finally admit claims of all creditors, which must then be examined for payment, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors.

Prospective resolution applicant - Role of – Explained.

Insolvency and Bankruptcy Code, 2016 – Committee of creditors - Role of, in the corporate resolution process – Held: Committee of Creditors decides on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan – Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations - Ultimately it is the commercial wisdom of the Committee of Creditors which operates to approve the best resolution plan, which is finally accepted after negotiation of its terms by such Committee with prospective resolution applicants – Furthermore, the Committee of Creditors does not act in any fiduciary capacity to any group of creditors, on the contrary, it is to take a business decision based upon ground realities by a majority, which then binds all stakeholders, including dissentient creditors - Thus, commercial wisdom of this majority of creditors is important which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place –ss. 21, 24, 28, 29, 30 and 31.

Insolvency and Bankruptcy Code, 2016 – National Company Law Tribunal- Adjudicating Authority and National Company Law Appellate Tribunal-Appellate Tribunal under – Jurisdiction of, qua resolution approved by Committee of Creditors – Held: Adjudicating Authority’s jurisdiction is circumscribed by s. 30(2) and Appellate Tribunal’s jurisdiction is circumscribed by s. 32 rw s. 61(3) Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of - If the Adjudicating Authority finds, on a given set of facts, that the said parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the said parameters - Reasons given by the Committee of Creditors while approving a resolution plan may be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal.

Insolvency and Bankruptcy Code, 2016 – Secured and unsecured creditors – Equality principle – Held: 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 - Operational creditors are separately viewed from these secured and unsecured financial creditors in S.No.5 of paragraph 7 of statutory Form H - Thus, it can be seen that the Code and the Regulations, read as a whole, lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code to resolve stressed assets - Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational.

Insolvency and Bankruptcy Code, 2016 – s. 21(8), 28 Constitution of a sub-committee by the Committee of Creditors – Permissibility of – Plea that the Committee of Creditors delegated its functions to a sub-committee, as a result of which, the subcommittee secretly made negotiations with ArcelorMittal – Held: Section 28(1)(h) provides that though the powers of Committee of Creditors are administrative in nature, they shall not be delegated to any other person – Power of approval of resolution plan u/s. 30(4), also cannot be delegated to any other body - However, subcommittees can be appointed for the purpose of negotiating with resolution applicants, or for performing other ministerial or administrative acts, provided such acts are in the ultimate analysis approved and ratified by the Committee of Creditors – On facts, every single administrative decision qua approving and administering the resolution plan submitted by ArcelorMittal was in fact done by the requisite majority of the Committee of Creditors itself, the sub-committee having been used only for purposes of initiating proceedings and negotiating with ArcelorMittal, which ultimately culminated in the resolution plan as finally negotiated, being passed by the requisite majority of creditors - Standard Chartered Bank voted in favour of the constitution of a subcommittee and also requested for inclusion of its name in subCommittee, however, when the Standard Chartered Bank found that things were going against it that it started raising objections on the technical plea that sub-committees cannot be constituted under the Code, thus, plea was not bonafide and is rejected. Insolvency and Bankruptcy Code, 2016 – s. 31(1) Extinguishment of Personal Guarantees and Undecided Claims – Held: s. 31(1) makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors – It cannot be said that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile directors of the corporate debtor – A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would lead to uncertainty regarding amounts payable by a prospective resolution applicant who successfully took over the business of the corporate debtor - All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor - Successful resolution applicant does on a fresh slate.

Insolvency and Bankruptcy Code (Amendment) Act, 2019 – ss. 4 and 6 – Constitutional Validity of – Held: As regards s. 4 of the Amendment Act, it is clear that as per s. 12 of the principal Act, the Corporate Insolvency Resolution proceedings should be mandatorily completed within a period of 330 days including any extension and legal proceedings related to resolution process of corporate debtor – Further grace period of 90 days is given, failing which corporate debtor shall be sent into liquidation – While leaving the provision otherwise intact, the word “mandatorily” is struck down as being manifestly arbitrary under Article 14 of the Constitution and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution – As regards, the substitution of s. 30(2)(b) by s. 6 of the Amending Act of 2019, it is constitutionally valid since the substituted s. 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable – Furthermore, Explanation 1 and 2 as also sub-clause (b) of s. 6 of the Amending Act of 2019, is constitutionally valid.

Disposing of the appeals and the writ petitions, the Court HELD:

Role of the resolution professional

1. The resolution professional is a person who is not only to manage the affairs of the corporate debtor as a going concern from the stage of admission of an application under Sections 7,

9 or 10 of the Insolvency and Bankruptcy Code, 2016 till a resolution plan is approved by the Adjudicating Authority, but is also a key person who is to appoint and convene meetings of the Committee of Creditors, so that they may decide upon resolution plans that are submitted in accordance with the detailed information given to resolution applicants by the resolution professional. Another very important function of the resolution professional is to collect, collate and finally admit claims of all creditors, which must then be examined for payment, in full or in part or not at all, by the resolution applicant and be finally negotiated and decided by the Committee of Creditors. In Arcelor Mital India case, it is made clear that the role of resolution professional is not adjudicatory but administrative. [Para 27] [329-F-G; 330-A-B]

ArcelorMittal India Private Limited v. Satish Kumar Gupta (2019) 2 SCC 1 : [2018] 12 SCR 362 – relied on.

Role of the prospective resolution applicant

2.1 Under the Insolvency Code, the prospective resolution applicant has a right to receive complete information as to the corporate debtor, debts owed by it, and its activities as a going concern, prior to the admission of an application under section 7, 9 or 10 of the Code. For this purpose, it has a right to receive information contained in the information memorandum as well as the evaluation matrix mentioned in Regulation 36-B. Once it evinces an expression of interest, what follows is laid down in Regulation 36- A(7). Thereafter, the resolution plan submitted by the prospective resolution applicant must provide for measures as may be necessary for the insolvency resolution of the corporate debtor for maximisation of the value of its assets, which may include transfer or sale of assets or part thereof, whether subject to security interests or not. Regulation 37 states that the plan may provide for either satisfaction or modification of any security interest of a secured creditor and may also provide for reduction in the amount payable to different classes of creditors – see Regulation 37. [Para 29] [333-H; 334A-B; 335-B-C]

2.2 Regulation 38 deals with the mandatory contents of a resolution plan, making it clear that such plan must contain a provision that the amount due to operational creditors shall be given priority in payment over financial creditors (Regulation 38(1)). Such plan must also include provisions as to how to deal with the interests of all stakeholders including financial creditors and operational creditors of the corporate debtor (Regulation 38 (1A)). It must then provide for the term of the plan, management and control of the business of the corporate debtor during such term, and its implementation. It must also demonstrate that it is feasible and viable, and that the resolution applicant has the capability to implement the said plan. [Para 30] [335-B-C]

Role of the committee of creditors in the corporate resolution process

3.1 Since it is the commercial wisdom of the Committee of Creditors to decide on whether or not to rehabilitate the corporate debtor by means of acceptance of a particular resolution plan, the provisions of the Code and the Regulations outline in detail the importance of setting up of such Committee, and leaving decisions to be made by the requisite majority of the members of the said Committee in its discretion. Thus, Section 21(2) of the Code mandates that the Committee of Creditors shall comprise all financial creditors of the corporate debtor. “Financial creditors” are defined in Section 5(7) of the Code as meaning persons to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred. “Financial debt” is then defined in Section 5(8) of the Code as meaning a debt along with interest, if any, which is disbursed against the consideration for the time value of money. “Secured creditor” is separately defined in Section 3(30) of the Code as meaning a creditor in favour of whom a security interest is created and “security interest” is defined by Section 3(31). [Para 31] [336-D-F]

3.2 In order to trigger application of the Code, a neat division has been made between financial creditors and operational creditors. Most financial creditors are secured creditors and most operational creditors are unsecured creditors. The rationale for only financial creditors handling the affairs of the corporate debtor and resolving them is for reasons that have been deliberated upon by the BLRC Report of 2015, which formed the basis for the enactment of the Insolvency Code. [Para 32] [337-B-C]

3.3 Section 24 of the Code deals with meetings of the Committee of Creditors. Though voting on the approval of a resolution plan is only with the financial creditors who form the Committee of Creditors, yet the resolution professional is to conduct the said meeting at which members of the suspended board of directors may be present, together with one representative of operational creditors, provided that the aggregate dues owed to all operational creditors is not less than 10% of the entire debt owed (Sections 24(2), (3) and (4) )of the Code. Voting shall be in accordance with the voting share assigned to each financial creditor, which is based on the financial debts owed to such creditors (Section 24(6)) of the Code. [Para 35] [340-G-H; 341-A]

3.4 Even though it is the resolution professional who is to run the business of the corporate debtor as a going concern during the intermediate period, yet, such resolution professional cannot take certain decisions relating to management of the corporate debtor without the prior approval of at least 66% of the votes of the Committee of Creditors. Thus, it is clear that since corporate resolution is ultimately in the hands of the majority vote of the Committee of Creditors, nothing can be done qua the management of the corporate debtor by the resolution professional which impacts major decisions to be made in the interregnum between the taking over of management of the corporate debtor and corporate resolution by the acceptance of a resolution plan by the requisite majority of the Committee of Creditors. Most importantly, under Section 30(4), the Committee of Creditors may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors, after considering its feasibility and viability, and various other requirements as may be prescribed by the Regulations. [Para 36] [341-B; 342-G-H; 343-A]

3.5 Regulation 18 to 26 of the 2016 Regulations deal with meetings to be conducted by the Committee of Creditors. Regulation 39(3) fleshes out Section 30(4) of the Code, making it clear that ultimately it is the commercial wisdom of the Committee of Creditors which operates to approve what is deemed by a majority of such creditors to be the best resolution plan, which is finally accepted after negotiation of its terms by such Committee with prospective resolution applicants. [Para 37, 38] [343-B-E]

3.6 The importance of the majority decision of the Committee of Creditors is then stated in Section 31(1) of the Code. What is left to the majority decision of the Committee of Creditors is the “feasibility and viability” of a resolution plan, which obviously takes into account all aspects of the plan, including the manner of distribution of funds among the various classes of creditors. The commercial wisdom of this majority of creditors is important which is to determine, through negotiation with the prospective resolution applicant, as to how and in what manner the corporate resolution process is to take place. [Para 40] [346-B-C; B-F]

K. Sashidhar v. Indian Overseas Bank (2019) SCC Online SC 257 – referred to.

Jurisdiction of the Adjudicating Authority and the Appellate Tribunal

4.1 It is the Adjudicating Authority which first admits an application by a financial or operational creditor, or by the corporate debtor itself under Section 7, 9 and 10 of the Code. Once this is done, within the parameters fixed by the Code. The Adjudicating Authority then appoints an interim resolution professional who takes administrative decisions as to the day to day running of the corporate debtor; collation of claims and their admissions; and the calling for resolution plans. After a resolution plan is approved by the requisite majority of the Committee of Creditors, the aforesaid plan must then pass muster of the Adjudicating Authority under Section 31(1) of the Code. The Adjudicating Authority’s jurisdiction is circumscribed by Section 30(2) of the Code. Thus, it is clear that the limited judicial review available, which can in no circumstance trespass upon a business decision of the majority of the Committee of Creditors, has to be within the four corners of Section 30(2) of the Code, insofar as the Adjudicating Authority is concerned, and Section 32 read with Section 61(3) of the Code, insofar as the Appellate Tribunal is concerned, the parameters of such review having been clearly laid down in K. Sashidhar case. [Para 41, 42] [347-A-D; 353-B]

Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407 : [2017] 8 SCR 33 ; Macquarie Bank Ltd v. Shilpi Cable Technologies Ltd. (2018) 2 SCC 674 [2017] 13 SCR 751 ; K. Sashidhar v. Indian Overseas Bank (2019) SCC Online SC 257 – relied on.

4.2 It was submitted that K. Sashidhar case missed a very vital provision of the Code which is contained in Section 60(5) of the Code; that the non-obstante clause of Section 60(5) speaks of any other law for the time being in force, which obviously cannot include the provisions of the Code itself. Secondly, Section 60(5)(c) is in the nature of a residuary jurisdiction vested in the NCLT so that the NCLT may decide all questions of law or fact arising out of or in relation to insolvency resolution or liquidation under the Code. Such residual jurisdiction does not in any manner impact Section 30(2) of the Code which circumscribes the jurisdiction of the Adjudicating Authority when it comes to the confirmation of a resolution plan, as has been mandated by Section 31(1) of the Code. A harmonious reading, therefore, of Section 31(1) and Section 60(5) of the Code would lead to the result that the residual jurisdiction of the NCLT under Section 60(5)(c) cannot, in any manner, whittle down Section 31(1) of the Code, by the investment of some discretionary or equity jurisdiction in the Adjudicating Authority outside Section 30(2) of the Code, when it comes to a resolution plan being adjudicated upon by the Adjudicating Authority. This argument is rejected. [Para 43] [353-G-H; 354-A-B]

4.3 The minimum value that is required to be paid to operational creditors under a resolution plan is set out under Section 30(2)(b) of the Code as being the amount to be paid to such creditors in the event of a liquidation of the corporate debtor under Section 53. The Insolvency Committee constituted by the Government in 2018 was tasked with studying the major issues that arise in the working of the Code and to recommend changes, if any, required to be made to the Code. The Insolvency Committee Report, 2018, inter alia, deliberated upon the objections to Section 30(2)(b) of the Code, inasmuch as it provided for a minimum payment of a “liquidation value” to the operational creditors and nothing more. Ultimately, the Committee decided against any amendment to be made to the existing scheme of the Code, thereby retaining the prescription as to the minimum value that was to be paid to the operational creditors under a resolution plan. However, the operational creditors, the preamble of the Code does speak of maximisation of the value of assets of corporate debtors and the balancing of the interests of all stakeholders. There is no doubt that a key objective of the Code is to ensure that the corporate debtor keeps operating as a going concern during the insolvency resolution process and must therefore make past and present payments to various operational creditors without which such operation as a going concern would become impossible. Sections 5(26), 14(2), 20(1), 20(2)(d) and (e) of the Code read with Regulations 37 and 38 of the 2016 Regulations all speak of the corporate debtor running as a going concern during the insolvency resolution process. Workmen need to be paid, electricity dues need to be paid, purchase of raw materials need to be made, etc. [Para 44, 45] [354-C-D; 356-E-G]

4.4 Regulation 38(1A) speaks of a resolution plan including a statement as to how it has dealt with the interests of all stakeholders, including operational creditors of the corporate debtor. Regulation 38(1) also states that the amount due to operational creditors under a resolution plan shall be given priority in payment over financial creditors. If nothing is to be paid to operational creditors, the minimum, being liquidation value - which in most cases would amount to nil after secured creditors have been paid - would certainly not balance the interest of all stakeholders or maximise the value of assets of a corporate debtor if it becomes impossible to continue running its business as a going concern. Thus, it is clear that when the Committee of Creditors exercises its commercial wisdom to arrive at a business decision to revive the corporate debtor, it must necessarily take into account these key features of the Code before it arrives at a commercial decision to pay off the dues of financial and operational creditors. There is no doubt whatsoever that the ultimate discretion of what to pay and how much to pay each class or sub-class of creditors is with the Committee of Creditors, but, the decision of such Committee must reflect the fact that it has taken into account maximising the value of the assets of the corporate debtor and the fact that it has adequately balanced the interests of all stakeholders including operational creditors. This being the case, judicial review of the Adjudicating Authority that the resolution plan as approved by the Committee of Creditors has met the requirements referred to in Section 30(2) would include judicial review that is mentioned in Section 30(2)(e), as the provisions of the Code are also provisions of law for the time being in force. Thus, while the Adjudicating Authority cannot interfere on merits with the commercial decision taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the corporate debtor needs to keep going as a going concern during the insolvency resolution process; that it needs to maximise the value of its assets; and that the interests of all stakeholders including operational creditors has been taken care of. If the Adjudicating Authority finds, on a given set of facts, that the said parameters have not been kept in view, it may send a resolution plan back to the Committee of Creditors to re-submit such plan after satisfying the said parameters. The reasons given by the Committee of Creditors while approving a resolution plan may thus be looked at by the Adjudicating Authority only from this point of view, and once it is satisfied that the Committee of Creditors has paid attention to these key features, it must then pass the resolution plan, other things being equal. [Para 46] [358A-H; 359-A] Secured and unsecured creditors; the equality principle

5.1 There is no doubt that even under the Code, reorganisation is a collective remedy designed to find an optimum solution for all parties connected with a business in the manner provided by the Code. Protecting creditors in general is, no doubt, an important objective, protecting creditors from each other is also important. What is meant by protecting creditors from each other is only that a Bankruptcy Code should not be read so as to imbue creditors with greater rights in a bankruptcy proceeding than they would enjoy under the general law, unless it is to serve some bankruptcy purpose. [Para 49] [365-G-H]

American Jurisprudence 2d, Volume 9 – referred to.

5.2 The World Bank Report of 2010, titled “A Global View of Business Insolvency Systems” is an earlier report, which opined on the basis of the French system, that creditors are divided into two separate classes without any further subclassification and that the advantage of such system is that it avoids potential conflict of interest among creditors in a particular class. Even according to this report, therefore, a “cramdown” on dissentient creditors would pass muster under an insolvency law if such creditors will receive, under a resolution plan, an amount at least equal to what such creditors would receive in a liquidation proceeding being “liquidation value”. [Para 52] [369B-E]

IMF paper on Development of Standards for Security Interest by Pascale De Boeck and Thomas Laryea, Counsel, IMF Legal Department; World Bank Report of 2010, titled “A Global View of Business Insolvency Systems”; Principles of International Insolvency by Philip R Wood’s – referred to.

5.3 Indeed, if an “equality for all” approach recognising the rights of different classes of creditors as part of an insolvency resolution process is adopted, secured financial creditors will, in many cases, be incentivised to vote for liquidation rather than resolution, as they would have better rights if the corporate debtor was to be liquidated rather than a resolution plan being approved. This would defeat the entire objective of the Code which is to first ensure that resolution of distressed assets takes place and only if the same is not possible should liquidation follow. [Para 54] [370-F-G]

5.4 Financial creditors are in the business of lending money. It is clear that financial creditors earn profit by earning interest on money lent with low margins, generally being between 1 to 4%. Also, financial creditors are capital providers for companies, who in turn are able to purchase assets and provide a working capital to enable such companies to run their business operation, whereas operational creditors are beneficiaries of amounts lent by financial creditors which are then used as working capital, and often get paid for goods and services provided by them to the corporate debtor, out of such working capital. On the other hand, market research carried out by India Brand Equity Foundation, a trust established by the Ministry of Commerce and Industry, as regards the Oil and Gas sector, has stated that the business risk of operational creditors who operate with higher profit margins and shorter cyclical repayments must needs be higher. Also, operational creditors have an immediate exit option, by stopping supply to the corporate debtor, once corporate debtors start defaulting in payment. Financial creditors may exit on their long-term loans, either upon repayment of the full amount or upon default, by recalling the entire loan facility and/or enforcing the security interest which is a time consuming and lengthy process which usually involves litigation. Financial creditors are also part of a regulated banking system which involves not merely declaring defaulters as non-performing assets but also involves restructuring such loans which often results in foregoing unpaid amounts of interest either wholly or partially. [Para 55] [370-H; 371-A-E]

5.5 By reading paragraph 77 of the Swiss Ribbons case, de hors the earlier paragraphs, the Appellate Tribunal has fallen into grave error. Paragraph 76 clearly refers to the UNCITRAL Legislative Guide which makes it clear beyond any doubt that equitable treatment is only of similarly situated creditors. This being so, the observation in paragraph 77 cannot be read to mean that financial and operational creditors must be paid the same amounts in any resolution plan before it can pass muster. On the contrary, paragraph 77 itself makes it clear that there is a difference in payment of the debts of financial and operational creditors, operational creditors having to receive a minimum payment, being not less than liquidation value, which does not apply to financial creditors. The amended Regulation 38 set out in paragraph 77 again does not lead to the conclusion that financial and operational creditors, or secured and unsecured creditors, must be paid the same amounts, percentage wise, under the resolution plan before it can pass muster. Fair and equitable dealing of operational creditors’ rights under the said Regulation involves the resolution plan stating as to how it has dealt with the interests of operational creditors, which is not the same thing as saying that they must be paid the same amount of their debt proportionately. Also, the fact that the operational creditors are given priority in payment over all financial creditors does not lead to the conclusion that such payment must necessarily be the same recovery percentage as financial creditors. So long as the provisions of the Code and the Regulations have been met, it is the commercial wisdom of the requisite majority of the Committee of Creditors which is to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors, together with negotiating with a prospective resolution applicant for better or different terms which may also involve differences in distribution of amounts between different classes of creditors. [Para 56] [375-D-H; 376-A-B]

5.6 Indeed, by vesting the Committee of Creditors with the discretion of accepting resolution plans only with financial creditors, operational creditors having no vote, the Code itself differentiates between the two types of creditors. Most financial creditors are secured creditors, whose security interests must be protected in order that they do not go ahead and realise their security in legal proceedings, but instead are incentivised to act within the framework of the Code as persons who will resolve stressed assets and bring a corporate debtor back to its feet. The argument that the expression “secured creditor” does not find mention in Chapter II of the Code, which deals with the resolution process, and is only found in Chapter III, which deals with liquidation, is for the reason that secured creditors as a class are subsumed in the class of financial creditors. Indeed, Regulation 13(1) of the 2016 Regulations mandates that when the resolution professional verifies claims, the security interest of secured creditors is also looked at and gets taken care of. Similarly, Regulation 36(2)(d) when it provides for a list of creditors and the amounts claimed by them in the information memorandum (which is to be submitted to prospective resolution applicants), also provides for the amount of claims admitted and security interest in respect of such claims. Under Regulation 39(4), the compliance certificate of the resolution professional as to the CIRP being successful is contained in Form H to the Regulations. [Para 57] [376-B-F]

Swiss Ribbons Private Limited v. Union of India (2019)

4 SCC 17 : [2019] 3 SCR 535 – referred to.

5.7 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. And, most importantly, operational creditors are separately viewed from these secured and unsecured financial creditors in S.No.5 of paragraph 7 of statutory Form H. Thus, it can be seen that the Code and the Regulations, read as a whole, together with the observations of expert bodies and this Court’s judgment, all lead to the conclusion that the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the Code - to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational. [Para 57] [377-D-F]

5.8 It is the Committee of Creditors, under Section 30(4) read with Regulation 39(3), that is vested with the power to approve resolution plans and make modifications therein as the Committee deems fit. It is this vital difference between the jurisdiction of the High Court under Section 392 of the Companies Act, 1956 and the jurisdiction of the Adjudicating Authority under the Code that must be kept in mind when the Adjudicating Authority is to decide on whether a resolution plan passes muster under the Code. When this distinction is kept in mind, it is clear that there is no residual jurisdiction not to approve a resolution plan on the ground that it is unfair or unjust to a class of creditors, so long as the interest of each class has been looked into and taken care of. [Para 58] [379-G-H; 380A] Mihir R. Mafatlal v. Mafatlal Industries Ltd. (1997) 1 SCC 579 : [1996] 6 Suppl. SCR 1 – referred to. The constitution of a sub-committee by the Committee of Creditors

6.1 The submission of the counsel for Standard Chartered Bank centered around the fact that the Committee of Creditors delegated its functions to a sub-committee, which delegation is impermissible. As a result of this delegation, the sub-committee secretly made negotiations with ArcelorMittal, which secret negotiations then produced a wholly inequitable result in that Standard Chartered Bank, though a financial creditor, was only paid 1.74% of its admitted claim of INR 3487 crores as opposed to other financial creditors who were paid 74.8% of what was claimed by them. [Para 59]

6.2 Under Section 21(8) of the Code, all decisions by the Committee of Creditors can be taken by a 51% majority vote, unless, a higher percentage is required under other specific provisions of the Code. When it comes to the exercise of the Committee of Creditors’ powers on questions which have a vital bearing on the running of the business of the corporate debtor, Section 28(1)(h) provides that though these powers are administrative in nature, they shall not be delegated to any other person, meaning thereby, that the Committee of Creditors alone must take the decisions mentioned in Section 28 and not any person other than such Committee. When it comes to approving a resolution plan under Section 30(4), there is no doubt whatsoever that this power also cannot be delegated to any other body as it is the Committee of Creditors alone that has been vested with this important business decision which it must take by itself. However, this does not mean that sub-committees cannot be appointed for the purpose of negotiating with resolution applicants, or for the purpose of performing other ministerial or administrative acts, provided such acts are in the ultimate analysis approved and ratified by the Committee of Creditors. Having gone through the minutes of all the important creditors’ meetings that were held, it is found that every single administrative decision qua approving and administering the resolution plan submitted by ArcelorMittal was in fact done by the requisite majority of the Committee of Creditors itself, the sub- committee having been used only for purposes of initiating proceedings and negotiating with ArcelorMittal, which ultimately culminated in the resolution plan as finally negotiated, being passed by the requisite majority of creditors on 23.10.2018. In point of fact, Standard Chartered Bank voted in favour of the constitution of a sub-committee on the 12 th committee of creditors meeting of 02.05.2018, as also, in favour of decisions of the Committee of Creditors finalizing drafts of sub-committees on eligibility of resolution applicants at the 13th Committee of Creditors meeting on 05.05.2018. Also, as a matter of fact, on 31.05.2018, at the 16 th Committee of Creditors meeting, a request was made by Standard Chartered Bank to be a member of the sub-committee, which request was later withdrawn. In the authorisation to the sub-committee to negotiate with ArcelorMittal, mooted at the 20 th Committee of Creditors meeting on 19.10.2018, a request was made by Standard Chartered Bank for inclusion in the said sub-committee. However, Standard Chartered Bank did not agree to put the reconstitution of the sub- committee to vote by the Committee of Creditors. Given these facts, thus, it is only when Standard Chartered Bank found that things were going against it that it started raising objections on the technical plea that subcommittees cannot be constituted under the Code. This is not a bonafide plea. The this objection of Standard Chartered Bank is also rejected. [Para 60, 62] [380-E; 383-A-H; 384-A] Pradyat Kumar Bhose v. The Hon’ble the Chief Justice of Calcutta High Court [1955] 2 SCR 1331 ; High Court of Judicature at Bombay through its Registrar v. Shirishkumar Rangrao Patil & Anr. (1997) 6 SCC 339: [1997] 3 SCR 1131 – referred to.

Extinguishment of Personal Guarantees and Undecided Claims

7.1 Section 31(1) of the Code makes it clear that once a resolution plan is approved by the Committee of Creditors it shall be binding on all stakeholders, including guarantors. This is for the reason that this provision ensures that the successful resolution applicant starts running the business of the corporate debtor on a fresh slate as it were. [Para 65] [386-E-F]

7.2 Following the State Bank of India’s judgment, it is difficult to accept the submission that that part of the resolution plan which states that the claims of the guarantor on account of subrogation shall be extinguished, cannot be applied to the guarantees furnished by the erstwhile directors of the corporate debtor. So far as the instant case is concerned, nothing is said which may affect the pending litigation on account of invocation of these guarantees. However, the NCLAT judgment being contrary to Section 31(1) of the Code and this Court’s judgment in State Bank of India case, is set aside. [Para 66] [387-C-D]

State Bank of India v. V. Ramakrishnan, (2018) 9 SCALE 597 – relied on.

7.3 The impugned NCLAT judgment in holding that claims that may exist apart from those decided on merits by the resolution professional and by the Adjudicating Authority/Appellate Tribunal can now be decided by an appropriate forum in terms of Section 60(6) of the Code, also militates against the rationale of Section 31 of the Code. A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. All claims must be submitted to and decided by the resolution professional so that a prospective resolution applicant knows exactly what has to be paid in order that it may then take over and run the business of the corporate debtor. This the successful resolution applicant does on a fresh slate. For these reasons, the NCLAT judgment must also be set aside on this count. [Para 67] [387-E-G]

Utilisation of profits of the corporate debtor during CIRP to pay off creditors

8. The RFP issued in terms of Section 25 of the Code and consented to by ArcelorMittal and the Committee of Creditors had provided that distribution of profits made during the corporate insolvency process will not go towards payment of debts of any creditor (Clause 7 of the first addendum to the RFP dated 08.02.2018). On this short ground, this part of the judgment of the NCLAT is also incorrect. [Para 68] [387-H; 388A]

Constitutional Validity of Section 4 and 6 of the Amending Act, 2019

9.1 There is no doubt that the Amending Act of 2019 consists of several Sections which have been enacted/amended as difficulties have arisen in the working of the Code. While it is true that it may well be that the law laid down by the NCLAT in this very case forms the basis for some of these amendments, it cannot be said that the legislature has directly set aside the judgment of the NCLAT. Since an appeal against the judgment of the NCLAT lies to the Supreme Court, the legislature is well within its bounds to lay down laws of general application to all persons affected, bearing in mind what it considers to be a curing of a defective reading of the law by an Appellate Tribunal. There can be no doubt whatsoever that apart from the present case the amendments made by the Amending Act of 2019 apply down the board to all persons who are affected by its provisions. Also, it is settled law that bad faith, in the sense of improper motives, cannot be ascribed to a legislature making laws. Therefore for all these reasons Sections 4 and 6 of the Amending Act of 2019 cannot be struck down on this score. [Para 73] [392-H; 393-AC; 395-B] Gajapati Narayan Deo and Others v. State of Orissa [1954] SCR 1 ; STO v. Ajit Mills Ltd. (1977) 4 SCC

98 : [1978] 1 SCR 338 – referred to.

9.2 So far as Section 4 is concerned, it is clear that the original timelines in which a CIRP must be completed have now been extended to 330 days, which is 60 days more than 180 plus

90 days (which is equal to 270 days). But this 330-day period includes the time taken in legal proceedings in relation to such resolution process of the corporate debtor. This provision is to get over what is stated in the judgment in ArcelorMittal India case, that the time taken in legal proceedings in relation to the corporate resolution process must be excluded from the timeline mentioned in Section 12. Secondly, the third proviso added to the Section also mandates that where the period of 330 days is over on the date of commencement of the Amending Act of 2019, a further grace period of 90 days from such date is given, within which such process shall either be completed or the corporate debtor be sent into liquidation. The raison d’être for this provision comes from the experience that has been plaguing the legislature ever since SICA was promulgated. [Para 74, 75] [395-B-E]

Madras Petrochem Limited v. BIFR (2016) 4 SCC 1 : [2016] 11 SCR 419 – referred to.

9.3 The speech of the Hon’ble Minister on the floor of the House of the Rajya Sabha also reflected the fact that with the passage of time the original intent of quick resolution of stressed assets is getting diluted. It is therefore essential to have timebound decisions to reinstate this legislative intent. It was also pointed out on the floor of the House that the experience in the working of the Code has not been encouraging. As the speech of the Hon’ble Minister on the floor of the House only indicates the object for which the amendment was made and as it contains certain data which it is useful to advert to, aid is taken from the speech not in order to construe the amended Section 12, but only in order to explain why the Amending Act of 2019 was brought about. [Para 76, 77] [397-H; 398-A; 400-F-G]

K.P. Varghese v. ITO [1982] 1 SCR 629 ; K.S. Paripoornan v. State of Kerala (1994) 5 SCC 593 : [1994] 3 Suppl. SCR 405 – referred to.

9.4 Given the fact that timely resolution of stressed assets is a key factor in the successful working of the Code, the only real argument against the amendment is that the time taken in legal proceedings cannot ever be put against the parties before the NCLT and NCLAT based upon a Latin maxim which subserves the cause of justice namely, actus curiae neminem gravabit. [Para 78] [400-G-H]

Atma Ram Mittal v. Ishwar Singh Punia (1988) 4 SCC

284 : [1988] 2 Suppl. SCR 528 ; Sarah Mathew v. Institute of Cardio Vascular Diseases, (2014) 2 SCC

62 : [2013] 12 SCR 674 ; Neeraj Kumar Sainy v. State of Uttar Pradesh (2017) 14 SCC 136 : [2017] 4 SCR

881 – referred to.

9.5 The time taken in legal proceedings cannot possibly harm a litigant if the Tribunal itself cannot take up the litigant’s case within the requisite period for no fault of the litigant, a provision which mandatorily requires the CIRP to end by a certain date - without any exception thereto - may well be an excessive interference with a litigant’s fundamental right to non-arbitrary treatment under Article 14 and an excessive, arbitrary and therefore unreasonable restriction on a litigant’s fundamental right to carry on business under Article 19(1)(g) of the Constitution of India. This being the case, this Court would ordinarily have struck down the provision in its entirety. However, that would then throw the baby out with the bath water, inasmuch as the time taken in legal proceedings is certainly an important factor which causes delay, and which has made previous statutory experiments fail as in Madras Petrochem case. Thus, while leaving the provision otherwise intact, the word “mandatorily” is striked down as being manifestly arbitrary under Article 14 of the Constitution of India and as being an excessive and unreasonable restriction on the litigant’s right to carry on business under Article 19(1)(g) of the Constitution. The effect of this declaration is that ordinarily the time taken in relation to the corporate resolution process of the corporate debtor must be completed within the outer limit of 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings. However, on the facts of a given case, if it can be shown to the Adjudicating Authority and/or Appellate Tribunal under the Code that only a short period is left for completion of the insolvency resolution process beyond

330 days, and that it would be in the interest of all stakeholders that the corporate debtor be put back on its feet instead of being sent into liquidation and that the time taken in legal proceedings is largely due to factors owing to which the fault cannot be ascribed to the litigants before the Adjudicating Authority and/or Appellate Tribunal, the delay or a large part thereof being attributable to the tardy process of the Adjudicating Authority and/or the Appellate Tribunal itself, it may be open in such cases for the Adjudicating Authority and/or Appellate Tribunal to extend time beyond 330 days. Likewise, even under the newly added proviso to Section 12, if by reason of all the said factors the grace period of 90 days from the date of commencement of the Amending Act of 2019 is exceeded, there again a discretion can be exercised by the Adjudicating Authority and/or Appellate Tribunal to further extend time keeping the aforesaid parameters in mind. It is only in such exceptional cases that time can be extended, the general rule being that 330 days is the outer limit within which resolution of the stressed assets of the corporate debtor must take place beyond which the corporate debtor is to be driven into liquidation. [Para 79] [402-E-H; 403-A-E]

Madras Petrochem Limited v. BIFR (2016) 4 SCC 1 : [2016] 11 SCR 419 – referred to.

9.6 When it comes to the validity of the substitution of Section 30(2)(b) by Section 6 of the Amending Act of 2019, it is clear that the substituted Section 30(2)(b) gives operational creditors something more than was given earlier as it is the higher of the figures mentioned in sub-clauses (i) and (ii) of subclause (b) that is now to be paid as a minimum amount to operational creditors. The same goes for the latter part of subclause (b) which refers to dissentient financial creditors. Section 30(2)(b) is in fact a beneficial provision in favour of operational creditors and dissentient financial creditors as they are now to be paid a certain minimum amount, the minimum in the case of operational creditors being the higher of the two figures calculated under sub-clauses (i) and (ii) of clause (b), and the minimum in the case of dissentient financial creditor being a minimum amount that was not earlier payable. As a matter of fact, pre-amendment, secured financial creditors may cramdown unsecured financial creditors who are dissentient, the majority vote of 66% voting to give them nothing or next to nothing for their dues. In the earlier regime it may have been possible to have done this but after the amendment such financial creditors are now to be paid the minimum amount mentioned in subsection (2). The order of priority of payment of creditors mentioned in Section 53 is not engrafted in sub-section (2)(b) as amended. Section 53 is only referred to in order that a certain minimum figure be paid to different classes of operational and financial creditors. It is only for this purpose that Section 53(1) is to be looked at as it is clear that it is the commercial wisdom of the Committee of Creditors that is free to determine what amounts be paid to different classes and sub-classes of creditors in accordance with the provisions of the Code and the Regulations made thereunder. [Para 80] [402-E-H; 404-A-C]

9.7 It is clear that Explanation 1 has only been inserted in order that the Adjudicating Authority and the Appellate Tribunal cannot enter into the merits of a business decision of the requisite majority of the Committee of Creditors. There is no residual equity jurisdiction in the Adjudicating Authority or the Appellate Tribunal to interfere in the merits of a business decision taken by the requisite majority of the Committee of Creditors, provided that it is otherwise in conformity with the provisions of the Code and the Regulations. [Para 81] [404-DE]

9.8 Equally, Explanation 2 applies the substituted Section to pending proceedings either at the level of the Adjudicating Authority or the Appellate Authority or in a Writ or Civil Court. No vested right inheres in any resolution applicant to have its plan approved under the Code. An appellate proceeding is a continuation of an original proceeding. This being so, a change in law can always be applied to an original or appellate proceeding. For this reason also, Explanation 2 is constitutionally valid, not having any retrospective operation so as to impair vested rights. [Para 82] [404-F-H] ArcelorMittal India Private Limited v. Satish Kumar Gupta (2019) 2 SCC 1 : [2018] 12 SCR 362 Swiss Ribbons Private Limited v. Union of India (2019) 4 SCC 17 : [2019] 3 SCR 535 ; Lachmeshwar Prasad Shukul v. Keshwar Lal Chaudhuri AIR 1941 FC 5 ; Shiv Shakti Coop. Housing Society, Nagpur v. Swaraj Developers & Ors. (2003) 6 SCC 659 – relied on.

9.9 The challenge to sub-clause (b) of Section 6 of the Amending Act of 2019, again goes to the flexibility that the Code gives to the Committee of Creditors to approve or not to approve a resolution plan and which may take into account different classes of creditors as is mentioned in Section 53, and different priorities and values of security interests of a secured creditor. This flexibility is referred to in the BLRC report, 2015. Also, the discretion given to the Committee of Creditors by the word “may” again makes it clear that this is only a guideline which is set out by this sub-section which may be applied by the Committee of Creditors in arriving at a business decision as to acceptance or rejection of a resolution plan. Thus, it is difficult to hold that any of these provisions is constitutionally infirm. [Para 83] [405-A-C]

The resolution plan of ArcelorMittal as amended and objections thereto

10.1 The resolution plan submitted by ArcelorMittal on 02.04.2018 proposed an upfront payment of INR 35,000 crores towards resolution of the debt of INR 49,213 crores of financial creditors. This was buttressed by a letter of commitment from Credit Agricole Corporate and Investment Bank. From this upfront cash recovery, unsecured financial creditors were to be paid only an aggregate amount of 5% of their admitted claims. Apart from this, INR 8,000 crores of upfront fresh capital infusion for improving operations and enhancing revival prospects of the corporate debtor was also proposed. So far as operational creditors were concerned, it was proposed that workmen and employees were to be paid INR 18 crores in full against their admitted claims, and out of other operational creditors, those small trade creditors defined as “having admitted claims of less than INR 1 crore” were to be paid in full, as opposed to trade and government creditors of over INR 1 crore, who were to be paid aggregate amount INR 196 crores. Other operational creditors were to be given nothing, liquidation value being payable to operational creditors as a class being in any case nil (INR 3339 crores were the aggregate admitted claims of all operational creditors as a class). [Para 84] [405-D-G]

10.2 On 22.10.2018, various changes were made in the original resolution plan. It was stated that the value and quality of security should be the basis on which proceeds should be distributed by most of the secured financial creditors. This amended resolution plan was approved by a majority of 92.24% of financial creditors. The sharing ratio between secured financial creditors having charge on project assets of the corporate debtor was 99.86% as opposed to 0.14%, so far as Standard Chartered Bank was concerned, which only had a charge on the pledge of shares of ESOL, being an offshore subsidiary of the corporate debtor. The upfront payment to secured financial creditors on the effective date would now be INR 41,909.29 crores and INR

60.71 crores to Standard Chartered Bank. It was pointed out that this was based on the worth of those shares as security, being only INR 24.86 crores. The final resolution plan as approved on 23.10.2018 was as follows - in the place of INR 35,000 crores to be paid on the effective date as an upfront amount, INR 39,500 crores and INR 2500 crores, aggregating INR 42,000 crores was to be paid. The resolution applicant agreed that the Committee of Creditors will decide the manner in which the financial package being offered by the resolution applicant to financial creditors will be distributed to secured financial creditors. The payment of INR 17.4 crore was to be made to unsecured financial creditors with a claim amount of more than INR 10 lakhs, and INR 30.55 lakhs to such creditors with a claim amount of less than INR 10 lakhs, with the fresh capital infusion for improving operations and enhancing revival prospects of the corporate debtor remaining at INR 8,000 crores. So far as operational creditors were concerned, there was no change made. At the 22nd meeting of the Committee of Creditors dated 27.03.2019, it was felt that INR 1,000 crores extra be paid for operational creditors over and above INR 1 crore each. Finally, the allocation of INR 1,000 crore extra to operational creditors was approved by a majority of 70.73% of the COC. [Para 8588] [408-E; 409-B-D; 413-C-E; 417-D]

10.3 The submission of Standard Chartered Bank, that the offer made by ArcelorMittal of payment of INR 42,000 crores as upfront in order to pay 100% principal outstanding of secured financial creditors of the corporate debtor cannot be accepted. Given that Standard Chartered Bank was reclassified as a secured financial creditor of the corporate debtor only on 10.09.2018 and that the said upfront payment of INR 42,000 crores would include the principal amount payable to Standard Chartered Bank as well, it is seen how in the course of negotiation, the vast majority of financial creditors have ultimately decided that Standard Chartered Bank will only get an amount based on its security interest, which was accepted by ArcelorMittal. It was submitted that the final resolution plan ultimately offered a sum of INR 39,500 crores instead of INR 42,000 crores, being a minimum upfront payment from which it was possible to negotiate upwards but not downwards. A conclusion cannot be arrived at that the acceptance of the resolution plan by the majority of the Committee of Creditors should be set aside on this score, inter alia, for the reason that the counsel for Standard Chartered Bank assured that he was not attacking the acceptance of the revised plan but only distribution of amounts payable under the said plan. This being so, it cannot be said that “feasibility and viability” of a resolution plan will not include distribution of the amount of debt under the said plan; and that the resolution plan must itself provide for distribution inter se between secured financial creditors. It is enough that under the Code and the Regulations, the resolution plan provides for distribution of amounts payable towards debts based upon a classification of various types of creditors. This both the original plan as well as the negotiated plan of ArcelorMittal have already done, both plans containing the amount to be paid to workmen separately, operational creditors of INR 1 crore and less separately, operational creditors of INR

1 crore and over separately and financial creditors, subdivided into secured and unsecured as sub-classes, separately. All that was left for distribution by ArcelorMittal was distribution inter se between secured financial creditors which was then done by a majority of 92.24%, based upon the value of their respective security interests. Therefore, the allegation that the Committee of Creditors relieved ArcelorMittal from the solemn offer made before the Supreme Court by reducing the offer amount of INR 42,000 crores by INR 2,500 crores so that ArcelorMittal could acquire the debts of OSPIL, is again a matter for negotiation being a business decision taken by the Committee of Creditors with ArcelorMittal. In any case ultimately INR 35,000 crores was upped to INR 42,000 crores, it being made clear in the final resolution plan that upfront payment of INR 42,000 crores is a committed amount, even if working capital adjustment turns out to be below INR 2,500 crores. [Para 89] [417-E-H; 418-A-E]

10.4 It cannot be said that the Adjudicatory Authority and consequently the Appellate Authority would be vested with the discretion to apply what was applied by the Committee of Creditors in the Orissa Manganese case. [Para 91] [419-E]

10.5 The submission that Section 53 of the Code would be applicable only during liquidation and not at the stage of resolving insolvency is correct. Section 30(2)(b) of the Code refers to Section 53 not in the context of priority of payment of creditors, but only to provide for a minimum payment to operational creditors. However, this again does not in any manner limit the Committee of Creditors from classifying creditors as f inancial or operational and as secured or unsecured. Full freedom and discretion has been given, to the Committee of Creditors to so classify creditors and to pay secured creditors amounts which can be based upon the value of their security, which they would otherwise be able to realise outside the process of the Code, thereby stymying the corporate resolution process itself. [Para 92] [419-F-G]

10.6 The submission based upon serious conflict of interest between secured and unsecured financial creditors, as the majority may get together to ride roughshod over the minority, flies in the face of the majority of financial creditors being given complete discretion over feasibility and viability of resolution plans, which includes the manner of distribution of debts that is contained in them, subject to following the provisions of the Code relating, inter alia, to dealing with the interests of all stakeholders including operational creditors. The Committee of Creditors does not act in any fiduciary capacity to any group of creditors, as submitted by the counsel for Standard Chartered Bank. On the contrary, it is to take a business decision based upon ground realities by a majority, which then binds all stakeholders, including dissentient creditors. It is important to note that the original threshold required by way of majority was 75%. It is during the working of the Code that this was found to be unrealistic and therefore reduced to 66% (amendments made to Section 28(3) and 30(4) of the Code by the Insolvency and Bankruptcy Code (Second Amendment) Act of 2018). [Para 93] [420-A-D]

10.7 The NCLAT judgment which substitutes its wisdom for the commercial wisdom of the Committee of Creditors and which also directs the admission of a number of claims which was done by the resolution applicant, without prejudice to its right to appeal against the said judgment, is set aside. [Para 94] [420-E]

10.8 So far as Civil Appeal No. 6409 of 2019 is concerned, the cheques issued by the corporate debtor due to its payment obligation towards BP Limited were not issued with a view to secure any payment obligation of the principal borrower i.e. EPGL, is a finding of fact which dislodges the claim of this appellant to be regarded as a financial creditor. There is no infirmity in the said finding. [Para 95] [420-F]

10.9 So far as Civil Appeal Diary No. 36838 is concerned, the NCLAT erred inasmuch as it added the claim of this Appellant to the tune of INR 861.19 crore despite the fact that the claim had already been admitted by the resolution professional thereby resulting in a double counting of the debt of this Appellant. This being the position, that part of the impugned NCLAT judgment is set aside as well. [Para 96] [420G-H; 421-A]

10.10 So far as Civil Appeal No. 6266 of 2019, there is no reason to dislodge the finding of the NCLAT that the claim was filed by the Appellant after the approval of the resolution plan. However, the NCLAT’s finding that the said claim is subject to arbitration and that it was open for the Appellant to pursue the matter in terms of Section 60(6) of the Code deserves to be set aside in terms of this judgment. [Para 97] [421-A]

10.11 As regards Civil Appeal No. 6269 of 2019, there is force in the contention of the Appellant that there has been an error in the impugned NCLAT judgment in as much as it notes the claim amount, as admitted, as being a sum of INR 124.88 crores, but later in the same judgment notes the said amount as INR 2.47 crores based on a chart submitted by the resolution professional. This chart submitted by the resolution professional specifies the amount of INR 2.47 crore (added after the NCLT judgment dated 08.03.2019), which is in addition to the amount of INR 124.88 crores already admitted by the resolution professional. Therefore, the NCLAT erred in noting INR 2.47 crore amount as the amount of the Appellant’s claim, and that part of the judgment is set aside. Thus, the claim of the appellant shall be the claim as admitted and registered by the resolution professional. This apart, there is no merit in the submission of the Appellant with respect to the sum of INR 121.72 crores as the same has been rightly rejected by the NCLAT in view of the fact that the said claim was filed after the completion of the CIRP period. However, the NCLAT’s judgment inasmuch as it left it open for the Appellant to pursue the matter in terms of Section 60(6) of the Code is set aside in terms of this judgment. [Para 98] [421-C-F]

10.12 As regards Civil Appeal No. 7266 of 2019 and 7260 of 2019, the resolution professional has rejected the claim of the Appellants on the ground of non-availability of duly stamped agreements in support of their claim and the failure to furnish proof of making payment of requisite stamp duty as per the Stamp Act despite repeated reminders having been sent by the resolution professional. The application filed by the Appellants before the NCLT came to be dismissed on the ground of nonprosecution. The subsequent restoration application filed by the appellants then came to be rejected by the NCLT on two grounds: one, that the applications could not be entertained at such a belated stage; and two, that notwithstanding the aforementioned reason, the claim had no merit in view of the failure to produce duly stamped agreements. The impugned NCLAT judgment, upheld the finding of the NCLT and the resolution professional. In view of these concurrent findings, the claim of the Appellants therefore requires no interference. Further, the submission of the Appellants that they have now paid the requisite stamp duty, after the impugned NCLAT judgment, would not assist the case of the Appellants at this belated stage. [Para 99] [421-G-H; 422-A-C]

10.13 As regards Writ Petition (Civil) No. 1064 of 2019, there is force in the submission of the writ petitioner that the NCLAT wrongly noted that the claim amount was notionally admitted by the resolution professional at INR 1 only. The resolution professional has admitted the claim of the Writ Petitioner to a tune of INR 17.09 crore and the same is recorded in the list of creditors prepared by the resolution professional. In view of the same, this part of the NCLAT judgment is thus erroneous and the claim shall be the claim as admitted and registered by the resolution professional. [Para 100] [422-D-E]

10.14 As regards Writ Petition (Civil) No. 1049 of 2019, the Petitioner is admittedly the operational creditor of one Wind World India Ltd whose CIRP proceedings are pending before the NCLT, Ahmedabad. The Petitioner has inter alia sought for permission to raise various issues arising out of the facts of its own case in the matter pending before the NCLT. In view of the fact that this judgment has not opined on the merits of the case of the Writ Petitioner pending before the NCLT, it is open to the Writ Petitioner to raise all contentions as permissible under the applicable law before the NCLT in the pending proceedings. [Para 101] [422-F-H]

10.15 So far as Dakshin Gujarat Vij Co. (Respondent No.

11 in Civil Appeal Diary No. 24417 of 2019), State Tax Officer (Respondent No. 12 in Civil Appeal Diary No. 24417 of 2019), Gujarat Energy Transmission Corporation Ltd. (Respondent No.

17 in Civil Appeal Diary No. 24417 of 2019) and Indian Oil Corporation Ltd. (Respondent No. 18 in Civil Appeal Diary No. 24417 of 2019) are concerned, the resolution professional admitted the claim of the abovementioned respondents notionally at INR 1 on the ground that there were disputes pending before various authorities in respect of the said amounts. However, the NCLT through its judgment dated 08.03.2019 directed the resolution professional to register the entire claim of the said respondents. The NCLAT upheld the order passed by the NCLT as aforesaid and admitted the claim of the respondents. Thus, this part of the impugned judgment is set aside on the ground that the resolution professional was correct in only admitting the claim at a notional value of INR 1 due to the pendency of disputes with regard to these claims. [Para 102] [423-A-D]

10.16 The CIRP of the corporate debtor will take place in accordance with the resolution plan of ArcelorMittal dated 23.10.2018, as amended and accepted by the Committee of Creditors on 27.03.2019, as it has provided for amounts to be paid to different classes of creditors by following Section 30(2) and Regulation 38 of the Code. [Para 103] [423-F]

State Bank of India v. Orissa Manganese and Minerals Ltd. CA(IB)No. 391/KB/2018 – referred to.