ESSAR STEEL INSOLVENCY CASE

The Judgement has paved the way for Arcelor Mittal and Nippon Steel to take over debt-laden Essar Steel. The Ahmedabad Bench of the NCLT has admitted an application for the initiation of insolvency resolution proceedings filed by State Bank of India (“SBI”) and Standard Chartered Bank (“SCB”) ii against Essar Steel India Limited (“Essar”). The RBI vide its Press Note dated June 13, 2017 (“Press Note”) had identified Essar as one of the 12 accounts which had to be proceeded against in the NCLT. Following the Press Note, Essar approached the Gujarat High Court to challenge (i) the validity of the Press Note; (ii) the decision of the Consortium of Lenders to initiate action under the IBC; and (iii) the Consortium of Lender’s failure to implement the restructuring plan which had been approved by the Board of Directors of Essar. Although the Gujarat High Court stayed the proceedings in the NCLT during the pendency of the challenge proceedings, it was eventually held that the creditor-banks could proceed before the NCLT (“GHC Ruling”). Further details about the Press Note and the judgment of the Gujarat High Court can be found here. Consequently, SCB and SBI initiated a Corporate Insolvency Resolution Process (“CIRP”) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (“IBC” or “Code”) in respect of Essar’s outstanding debts.