Asian Colour Coated Ispat Limited (ACCIL), a steel company, in the year 2018 was included in the Reserve Bank of India’s second list of defaulters on which banks were asked to take corrective action. State Bank of India, Punjab National Bank and JM Financial were among the lenders to ACCIL. Hon’ble National Company Law Tribunal (NCLT) on 20th July 2018 admitted the company petition for the commencement of Corporate Insolvency Resolution Process (CIRP) of ACCIL. Total claim received by the RP from all the creditors was Rs.11,949.97 Crores out of which amount of claim admitted by the Resolution Professional was Rs.7,123.22 Crores.
After inviting expression of interest (EOI) by the RP, 12 EOI were received by the RP. JSW Steel Limited became a Successful Resolution Applicant through its wholly-owned subsidiary JSW Steel Coated Products Limited (JSWSCPL) submitted unsigned resolution plan on 8th March 2019 amounting to Rs. 1200 Crore. The Resolution Applicant after considering the additional facts and feedback received from the committee of creditors (CoC), revised the plan value from Rs. 1200 Crores to Rs. 1550 Crores. The resolution plan was approved with 79.3% of voting shares of the CoC. The Delhi Bench of NCLT (National Company Law Tribunal) on 19th October 2020 approved the resolution plan submitted by JSW Steel to acquire bankrupt steel company ACCIL for Rs 1,550 crore.
Table 1: Original and Revised Resolution Plan Comparison
|Payment to creditors|
(% of admitted claim)
|Original Plan – |
Rs. 1200 Crores
|Revised Plan – |
|Unsecured Financial Creditors||17.1%||1.47%|
Unsecured Financial Creditors comprising of Corporation Bank, Union Bank of India, IDBI Bank, Commercial Bank of Dubai, Indian Overseas Bank, Karur Vyasa Bank aggregating to 8.66% of voting share in the CoC who are the lenders of a related party of the ACCIL to whom ACCIL provided corporate guarantee filed an application and who dissented to the resolution plan, sought relief for change in the distribution of the payment to financial and operational creditors since they are getting settled at a much lower percentage as compared to the operational creditors.
Unsecured Financial Creditors have relied their saying on the point that since the operational creditors are getting paid more than the Financial Creditors there is a violation of section 53 of the IBC (Insolvency and Bankruptcy Code) which deals with the distribution of proceeds from the sale of the liquidation assets.
In reply to the saying of financial creditors w.r.t differential payment, Resolution Applicant has stated that it is the CoC that must assess and analyse the feasibility and viability of the plan and the manner of distribution. In section 30 (4) of the IBC, it has been clarified that CoC can decide the distribution inter-se creditors taking into consideration the nature of security. There are various judgments which gives paramount importance to the commercial wisdom of the CoC.
NCLT after hearing the all the parties in the application concluded that there shall not be any differential treatment, inter-se creditors falling under section 30(2)(b) of the code, Explanation-1 of sec. 30(2)(b) says that distribution shall be fair and equitable to such creditors. Accordingly, NCLT disposed of the application and directed the resolution applicant to distribute the amount in between unsecured financial creditors and operational creditors at an equal percentage by applying the same haircut.
Provision under IBC
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