Left Menu
Development News Edition

SC ruling in Essar Steel case 'watershed moment' for insolvency jurisprudence: Sahoo

PTI | New Delhi | Updated: 24-11-2019 13:56 IST | Created: 24-11-2019 13:54 IST
SC ruling in Essar Steel case 'watershed moment' for insolvency jurisprudence: Sahoo
Image Credit: Wikimedia Commons

The Supreme Court ruling in Essar Steel matter is a "watershed moment" for the insolvency jurisprudence and takes away excuses of parties to halt the resolution process midway, according to IBBI Chairperson M S Sahoo. The Insolvency and Bankruptcy Code, 2016 envisages closure of a corporate insolvency resolution process (CIRP) in a time-bound manner.

The chief of the Insolvency and Bankruptcy Board of India (IBBI) noted that in three years, the Code "boasts of a vast and rich jurisprudence", adding that with every court judgment, the insolvency law is developing deeper and stronger roots. On November 15, the Supreme Court paved the way for ArcelorMittal's takeover of Essar Steel for Rs 42,000 crore under the insolvency resolution process, which had been pending for long, mainly due to legal challenges.

In an interview to PTI, Sahoo said the judgment provides clarity about the roles of resolution professional, resolution applicant, Committee of Creditors (CoC), adjudicating authority and appellate authority, qua a resolution plan. "This judgment is a watershed moment in the insolvency jurisprudence and in sync with the basic structure of the insolvency law in India and elsewhere," he said.

Besides establishing the supremacy of the CoC in the matter relating to CIRP, Sahoo noted that the order explains the extent of limited review available to the adjudicating authority, which can in no circumstance trespass upon a business decision of the majority of the CoC. Among others, the ruling resolves the issue of distribution of profits made during the resolution process and stops the claims popping up after approval of a resolution plan.

"It (judgment) upholds the sanctity of overall timeline of 330 days for a CIRP, except in exceptional cases. It also upholds the provisions relating to the distribution of realizations under a resolution plan, considering that treating unequals equally would defeat the very objective of the Code. "It endorses the resolution plan of ArcelorMittal, as amended and accepted by the CoC, for resolution of Essar. All these take away excuses of the parties to halt the process of resolution midway and streamline the processes for timely conclusion of CIRPs," Sahoo said. About jurisprudence, he said that economic legislation is more or less a skeletal structure and judicial pronouncements add flesh and blood to it. But the insolvency law has vast and rich jurisprudence within a short span, he added.

"The adjudicating authority, the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court have explained several conceptual issues, settled contentious issues and resolved grey areas, with alacrity. "These orders have provided clarity to the roles of various stakeholders in the resolution process and as to what is permissible and what is not, thereby streamlining the processes and ensuring the predictability of the processes for future," Sahoo said.

While delivering its ruling in the Essar Steel case, the apex court also relaxed the timeline of 330 days for resolution. It would be open for the adjudicating authority to maintain the timeline in exceptional cases, the court had said. Under the Code, a resolution process is to be completed in 180 days and a one-time extension of up to 90 days can be availed. Through an amendment to the law, an overall mandatory time of 330 days, including the time taken in legal proceedings, was introduced.

"It is an accepted principle that where a judicial/quasi-judicial authority is required to perform a statutory duty within the time prescribed therefor, the same is regarded directory. It is because, the stakeholders must not suffer if the authority fails to perform the statutory duty within the time, for whatever reasons. That is why the word 'mandatorily' has been dropped," Sahoo said. Elaborating further, he said the impact is that a resolution process must be completed within 330 days from the insolvency commencement date, including extensions and the time taken in legal proceedings.

"It is only in exceptional cases that time can be extended, particularly when the adjudicating authority cannot take up a matter within the prescribed time for no fault of the stakeholders. "Thus, the timelines of 180 days, an additional 90 days, and the overall 330 days remain sacrosanct. With most of the contentious issues having been settled, extensive learning by the stakeholders over the last three years, and enhanced bench capacity of the adjudicating authority, I do not see any difficulty in time-bound insolvency resolution," he added.

As on September 30, more than 2,540 cases were admitted under the Code, out of which resolution process is on in 1,497 cases, as per the data available with the IBBI.



Augmented Reality: Potential future of education

AR has acquired a foothold in educational settings, particularly in developed countries, as an alternative solution to conventional learning experiences as it provides students an immersive, three-dimensional atmosphere with real-world char...

Uganda COVID-19 response: Was off to a good start but reopening dwindled prospects

Uganda has shown success in using health information to enhance efficiency of disease surveillance, reporting and monitoring. The success, however, has critical challenges confronting it as the country resumes normal activities....

New farm bills in India: Focusing on farms or farmers?

... ...

Kenya’s COVID-19 response: Chaos amid lack of information

Confusing numbers and scanty information on how effective curfews and lockdowns have been in breaking transmission have amplified coordination and planning challenges in Kenyas response to COVID-19. Without accurate data, it is impossible t...


Latest News

Suspected Islamists kill 17 civilians in eastern Congo raid

Assailants killed at least 17 people in a raid on a village in the east of the Democratic Republic of Congo on Friday night, local authorities said, blaming fighters from an Islamist militia group. The army confirmed the attack in the Bulik...

IPL Scoreboard: RCB vs SRH

Scoreboard of the Indian Premier League match between Royal Challengers Bangalore and Sunrisers Hyderabad here on SaturdayRoyal Challengers Bangalore Innings Josh Philippe c Pandey b Khan 32 Devdutt Padikkal b Sandeep ...

Jishnu Barua assumes office as new Assam chief secretary

Senior IAS officer Jishnu Barua on Saturday took charge as the new chief secretary of Assam. He replaced Kumar Sanjay Krishna, who retired after serving in the post for 10 months.Barua, who took charge at an official ceremony at state secre...

UK PM Johnson to impose England national lockdown until Dec. 2 - ITV

British Prime Minister Boris Johnson will impose a new month-long national lockdown in England until Dec. 2, ITVs political editor said on Saturday.All but essential shops will be asked to close and people should no longer meet family or fr...

Give Feedback