LegalAware
LegalAware.ai
EMPOWERING LEGAL AWARENESS

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.

Official source (sci.gov.in)View Judgment (PDF)

More rulings in Company & Insolvency Law

Company & Insolvency LawDelhi High Court

M/S Meena Steels Limited vs. Punjab National Bank

The Court held that Section 125(2)(h) applies to money received by a company for allotment of securities, not to a refund arising from a court-sanctioned reduction of share capital, so the Bank's reliance on it was misplaced. Since the earlier orders had already been passed after considering the material on record and no error apparent on the face of the record was shown, the Court found no ground for review and dismissed the Bank's petition.

Decided 8 Oct 2026Read case
Company & Insolvency LawSupreme Court of India

Greenopolis Welfare Confederation v. Rakesh Kumar Gupta

The Supreme Court held that once an insolvency petition is admitted, the proceedings become proceedings "in rem" affecting all creditors and stakeholders, not just the original applicant, so the original applicant cannot simply withdraw, but if fraud and collusion are found, the Adjudicating Authority (AA) can and should disallow that fraudulent applicant from continuing, while deciding separately whether the wider insolvency process itself should still continue to protect other genuine stakeholders like homebuyers. The Court allowed this appeal in part, set aside the NCLAT's blanket recall of the entire CIRP, and restored the insolvency proceedings to the Adjudicating Authority, directing it to now decide afresh, after hearing the resolution professional, the committee of creditors, and the homebuyers, whether the CIRP should continue in view of the confirmed fraud, and to do so expeditiously given how long the case has run.

Decided 30 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

M/S ASJ Finsolutions Pvt. Ltd. v. Vikram Bajaj

The Supreme Court upheld the NCLAT's decision and dismissed the appeal. It held that the e-auction notice explicitly provided for forfeiture of the entire amount paid, including the EMD, if a successful bidder failed to pay the balance sale consideration on time, and forfeiture followed automatically once that default occurred. The Court rejected the appellant's reliance on the "Triple Test" (rigged auction, lack of genuine bidder capacity, or extraneous prevention), finding none of those circumstances applied here, and held that a mere assertion of willingness to pay does not substitute for demonstrated financial capacity. The argument that liquidation regulations cap EMD at 10% of reserve price did not help the appellant, since it had voluntarily agreed to the auction notice's forfeiture clause covering the full deposit, not just the EMD.

Decided 28 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

Regional Provident Fund Commissioner-II v. Mamta Binani & Ors.

The Supreme Court agreed that the NCLAT correctly read Section 61(2) as allowing no condonation beyond 45 days, and that its own precedents (National Spot Exchange, Tata Steel) were correctly stated but factually distinguishable since those cases involved litigant fault, not tribunal system failure. Here, the delay was caused entirely by a backend/OTP failure in the NCLAT's own e-filing system, as confirmed by the NCLAT Registry's own report. Invoking the principle "actus curiae neminem gravabit" (an act of the court shall harm no one), the Court held that limitation runs against a litigant only when the court/tribunal's own systems are actually capable of receiving filings; when the tribunal's system itself fails, the litigant should not be penalised. It set aside the NCLAT's order and restored the appeal for fresh consideration, directing that the date of the first bona fide e-filing attempt be treated as the date of presentation.

Decided 10 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

M/S Kerala Industrial Infrastructure Development Corporation v. Central Board of Trustees and Anr.

The Court reaffirmed settled law that Provident Fund and Gratuity dues of workmen must be paid in full by the resolution applicant, since these funds are not part of the liquidation estate and cannot be subjected to the insolvency law's "waterfall" distribution mechanism. On the question of whether "damages"/penalty under Section 14B of the EPF Act for delayed payment is automatic and mandatory, or whether the authority has discretion to reduce or waive it, the Bench found itself doubting an earlier Supreme Court decision (Horticulture Experiment Station Gonikoppal) which had held such penalty to be automatic. Rather than deciding this specific legal question itself, the Bench referred it to a larger bench for authoritative resolution, while clarifying the appellants remain free to separately seek waiver/reduction of penalty from the Central Board under the statute's second proviso to Section 14B. As practical interim relief, the Court directed the appellant companies to pay the outstanding EPF dues (with Section 7Q interest) in four quarterly instalments running from December 2026 to September 2027, failing which EPFO could proceed with recovery.

Decided 9 Sept 2026Read case
Company & Insolvency LawSupreme Court of India

The Authorised Representative for Granite Gate Properties Private Limited (Ms. Rakesh Verma) v. M/s New Okhla Industrial Development Authority

The Supreme Court held that NOIDA's lease with the original developer existed to serve a public welfare purpose, providing housing and industrial infrastructure, not pure profit-making, and that the penalty/time-extension charges were meant to deter and punish a defaulting developer, not innocent homebuyers or a new resolution applicant who had no role in the original default. Since the delay was solely the fault of the now-insolvent original developer, and the homebuyers and SRA had themselves funded and revived the stalled project, it would be unjust to pass on the developer's "past sins" as insolvency-resolution costs. The Court set aside the NCLAT's direction treating the time-extension charges as CIRP costs, and separately rejected NOIDA's own appeal for extending those penalty charges up to ten years under its newer, harsher policy. Granite Gate's appeal was allowed and NOIDA's appeal was dismissed.

Decided 3 Sept 2026Read case