Analysis of the Judgment of the Hon’ble NCLT, Ahmedabad Bench in the matter of ESSAR STEEL: Rejection of Promoter Ruia’s Settlement Bid by Akash Sharma
The NCLT, Ahmedabad Bench has rejected the settlement offer by the Ruia family, Essar Steel Limited’s promoter. The offer was made on the day the COC approved ArcelorMittal’s resolution plan for the insolvent Essar Steel.
The tribunal pointed out that an application for withdrawal of insolvency proceedings under section 12A of the IBC, 2016 can only be considered if it's filed by the applicant who initiated insolvency in the first place. In the Essar Steel insolvency matter, lenders State Bank of India and Standard Chartered Bank had filed insolvency cases.
The Supreme Court in the matter of Swiss Ribbons Pvt. Ltd.has clarified that where Committee of Creditors is yet not constituted, a party can approach the NCLT directly and the NCLT may exercise its power under Rule 11 of the NCLT Rules and allow or disallow an application for withdrawal of settlement after hearing the concerned parties and considering relevant factors of the case.
Further, the Supreme Court in the matter of Brilliant Alloys Limited has held that Regulation 30A has to be read along with Section 12A which does not stipulate that withdrawal cannot be permitted after issuing of invitation for expression of interest.
In this matter, Ahmedabad NCLT failed to exercise its correct jurisdiction under IBC, 2016 and also the legislative intent behind enactment of IBC. It also failed to adhere to the correct judicial precedent set by Hon'ble NCLAT in the matter of Parker Hannifin vs Prowess International that once there is no demand of dues by creditors left and therefore by analogy if their dues are paid or offered to be paid by the promoters of the Corporate Debtor, the insolvency proceeding under section 7 or 9 comes to an end and hence, this rejection of the offers of Ruias by the Tribunal to regain control of their flagship beleaguered company, Essar Steel by proposing Rs.54,389 crore which is more than Rs.12,000 crore than the offer of ArcelorMittal which is approved by the COCs is grossly erroneous. We wish that the Hon'ble NCLAT will set aside this order.
Note: The legislative intent behind enactment of IBC was a revival of the companies and not otherwise.
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