The Supreme Court has restored the primacy of secured creditors over unsecured creditors when it finally gave a go-ahead to the resolution plan of ArcelorMittal in the Essar Steel insolvency case approved by the National Company Law Tribunal (NCLT). It not just established the primacy of secured creditors, it also upheld the commercial wisdom of the committee of creditors (CoC).
The court reiterated that in IBC (Insolvency and Bankruptcy Code), it is the CoC which has the ultimate authority over the matter concerning distribution of resolution proceeds. The verdict would also send a strong signal to the NCLT and the NCLAT against interfering too much into commercial considerations.
The apex court verdict in the Essar Steel case has given a new lease of life to the IBC, which was marred by contradictory interpretation of the law by the adjudicating authorities. These interpretations not only went against the spirit of the IBC but also posed a danger to the resolution of many high-ticket NPA cases.