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Legal Case Shots

Court judgements broken down into the case type, how the decision played out, and the lesson worth remembering, with the full judgement available as a PDF.

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Legal Case Shots is a searchable database of Supreme Court of India judgments, each broken down into the case type, the court's key holding, and a practical lesson learnt, with the full judgment available as a PDF for citation or deeper reading.

Company & Insolvency LawSupreme Court of India

Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors.

Civil Appeal · 2019 INSC 1256Decided 15 Nov 2019
Civil Appeal Nos. 8766-67 of 2019
Justice Rohinton Fali Nariman · Justice Surya Kant · Justice V. Ramasubramanian

Background

Essar Steel India Limited went into insolvency resolution proceedings, and after prolonged litigation (including an earlier Supreme Court judgment in 2018), ArcelorMittal's resolution plan, offering an upfront payment of about Rs. 35,000 crore, was approved by 92.24% of the Committee of Creditors (CoC). The National Company Law Appellate Tribunal (NCLAT), however, substantially rewrote the plan, ordering that all financial and operational creditors be paid pro-rata on an equal footing, effectively disregarding the CoC's own distribution decisions. This large batch of appeals and writ petitions, filed by the CoC, individual creditors, and others, also challenged the constitutional validity of 2019 amendments to the Insolvency and Bankruptcy Code that had introduced a strict 330-day deadline for resolution and changed how operational creditors must be paid.

Decision Breakdown

The Supreme Court held that the NCLAT had exceeded its jurisdiction by second-guessing the CoC's "commercial wisdom" on how to distribute funds among different classes of creditors: the law gives adjudicating authorities only limited power to check that a resolution plan is lawful and procedurally fair, not to rewrite its commercial terms, and there is no requirement that all creditors be treated identically regardless of whether they are secured, unsecured, or operational. On the constitutional challenge, the Court struck down only the word "mandatorily" from the amended 330-day deadline, holding that an absolute, exception-less cut-off (including time spent in litigation beyond a company's control) would be arbitrary and violate Articles 14 and 19(1)(g); it upheld 330 days as the ordinary outer limit but allowed adjudicating authorities limited discretion to extend it in genuinely exceptional circumstances. The rest of the 2019 amendments (on minimum payments to operational and dissenting financial creditors) were upheld as constitutionally valid and, in fact, beneficial to those creditors. The NCLAT's judgment was set aside and the CoC-approved ArcelorMittal resolution plan was restored, while a few specific, narrow claim-verification issues raised by individual creditors were sent back for correction/decision by the appropriate forum.

Lesson Learnt

In company insolvency resolution, creditors are not all entitled to equal treatment: the law recognizes that secured, unsecured, and operational creditors can be treated differently, and courts/tribunals will generally respect the creditors' committee's commercial judgment on how to divide the proceeds, intervening only to check legality and basic fairness, not to rewrite the business deal itself.

Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta & Ors. – Legal Case Shots | LegalAware