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The bench, headed by Justice RF Nariman, clarified that financial creditors enjoy primacy and the adjudicating authority cannot interfere with the decision approved by the committee of creditors.
"No doubt the ultimate discretion on distribution is with the Committee of Creditors (CoC), whose decision should balance the interests of all stakeholders," the bench said.
The top court said that the adjudicating authority can send back the resolution plan to the Committee of Creditors for implementation in accordance with the guidelines but cannot change the commercial decision taken by the CoC.
The verdict came on a plea of the lenders challenging NCLAT's July 4 order in which it had approved steel tycoon Lakshmi Mittal-led ArcelorMittal's Rs 42,000-crore bid for the acquisition of Essar Steel, after it rejected a plea by the lead shareholder of the debt-laden firm challenging the eligibility of the bidder.
The top court also relaxed the timeline of 330 days to find a resolution plan as prescribed under the Insolvency and Bankruptcy Code.
An amendment to the Insolvency and Bankruptcy Code earlier this year gave the Committee of Creditors (CoC) explicit authority over the distribution of proceeds in the resolution process and fixes a firm timeline of 330 days for resolving cases referred to the IBC.
In its July 4 order, the NCLAT had said that financial creditors will get 60.7 per cent of their admitted claims of Rs 49,473 crore, almost same as operational creditors.
ArcelorMittal had told the NCLAT that it would pay Rs 42,000 crore, including a minimum guarantee of Rs 2,500 crore as working capital, for acquiring Essar Steel under the insolvency process.
Essar Steel is reeling under a debt pile of Rs. 30,030 crore from financial creditors and Rs. 11,969 crore from operational creditors. State-run banks are primary financial creditors of Essar Steel while its operational creditors are vendors and suppliers.
It is among the twelve large steel and other infrastructure companies which defaulted and were referred to the bankruptcy court in 2017.