25 January 2019
Hon’ble Supreme Court Upholds the Constitutional Validity of the Insolvency and Bankruptcy Code in the Essar Steel Matter
Vide its judgment dated 25.01.2018, the Hon’ble Supreme Court sets two provisions in place. Firstly, Section 29A of the Insolvency and Bankruptcy Code bars existing promoters of an insolvent firm from participating in bidding. On the other hand Section 12A says that a company can withdraw itself from insolvency proceedings if at least 90 percent of the committee of creditors—a panel of the lenders—vote in favour of the withdrawal. Thus, even though there is a bar on promoters to come in as resolution applicants, the Ruia’s can definitely afford the Section 12A route where its biggest hurdle would be the State Bank of India having around Rs 15, 000 Crore out of the total exposure of Rs 54, 000 Crore. The win for Ruia’s could also mean that investors would not have to take a haircut as the next best offer by Arcelor Mittal is approximately 42, 000 Crore as approved by the lenders.