Today on 22nd October 2019, Sr Advocate Kapil Sibal, Counsel for Standard Chartered, argued before a bench of Justice Rohinton Fali Nariman, Justice Surya Kant, And Justice V. Ramasubramanian in Supreme Court that the jurisdiction of Committee of creditors is limited only to feasibility and viability of resolution plan.
Committee of Creditors(CoC) has no authority to decide priority of creditors in which they have to be paid. This is work of legislature. CoC didn’t even discuss final resolution plan with Standard Chartered and finalized to pay 35500 crore. This is neither binding nor justified. CoC finalized their plan as majority in Parliament approves a bill without considering other. Senior Advocate Kapil Sibal appeared for Standard Chartered Bank, to defend the equal treatment given to them. Sibal raised the question regarding the position of the CoC to decide the allocation of proceeds under the Resolution Plan, as it was only supposed to be concerned with the preservation of assets of the Corporate Debtor Essar Steel. Sibal pointed out that as per regulation 38(1)(a) of the CIRP Regulations, the Resolution Applicant (Arcelor Mittal in this case) must decide and give. He clarified that SCB was not challenging the resolution plan in itself, but only its manner of distribution.
There is difference between financial creditors and operational creditors. Financial creditors have huge sum of money as financial loan and credit, whereas operational creditors transact small amounts of money but are many in number. But tribunal treats financial creditors, operational creditors and secured creditor equally. Right of Creditor is suspended during insolvency resolution process. He added that in the minutes of Committee of Creditor, SBI suggested financial creditor should be up to liquidation value. Committee of Creditor has no authority to decide priority of creditors in which they have to be paid.
Sibal brought on record certain communications made between Arcelor Mittal India Ltd (AMIL) and the advocate of the CoC, and highlighted the ‘Letter of Commitment’ given by AMIL for upfront amount of 42,000 cr.
It was noted that later on after communication with CoC, a ‘gross capital adjustment’ was made and upfront amount was reduced to 39,500 cr. Sibal. He questioned the interest of COC to reduce such bid amount, as the purpose of the CoC is to get as much amount for resolution as is possible.
Gopal Subramanian argued that the NCLAT had acted beyond its jurisdiction prescribed under Section 61 of the Insolvency and Bankruptcy Code, 2016.
The Supreme Court earlier had stopped Arcelor Mittal from paying the lenders and ordered status quo in the insolvency case until the bankruptcy tribunal decides on the proportion of amount to be paid to financial and operational creditors after Bench Of Indu Malhotra and Rohinton Nariman declared resolution plan to be ineligible on October 4, 2018.
— India Legal Bureau