R.F. Nariman, J. - (1.) Delay Condoned in Civil Appeal Diary No. 31409 of 2019 and Civil Appeal Diary No. 36838 of 2019. I.A. No. 102638 of 2019 in Civil Appeal Diary No. 24417 of 2019 for Permission to File Appeal allowed. Appeal Admitted. 1. This group of appeals and writ petitions raises important questions as to the role of resolution applicants, resolution professionals, the Committee of Creditors that are constituted under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code"), and last, but by no means the least, the jurisdiction of the National Company Law Tribunal (hereinafter referred to as "NCLT"/"Adjudicating Authority") and the National Company Law Appellate Tribunal (hereinafter referred to as "NCLAT"/"Appellate Tribunal"), qua resolution plans that have been approved by the Committee of Creditors. The constitutional validity of Sections 4 and 6 of the Insolvency and Bankruptcy Code (Amendment) Act, 2019 (hereinafter referred to as the "Amending Act of 2019") have also been challenged. These appeals and writ petitions are an aftermath of this Court's judgment dated 04.10.2018, reported as ArcelorMittal India Private Limited v. Satish Kumar Gupta, 2019 2 SCC 1.
(2.) On 02.08.2017, the NCLT, Ahmedabad admitted Company Petition (I.B.) No. 39 of 2017 filed by Standard Chartered Bank together with a Petition filed by the State Bank of India under Section 7 of the Code. One Satish Kumar Gupta was appointed as the interim resolution professional, who was later confirmed as resolution professional. On 06.10.2017, the resolution professional by way of an advertisement in the Economic Times, invited expressions of interest from all interested resolution applicants to present resolution plans for rehabilitating the corporate debtor, namely, Essar Steel India Limited. On 24.12.2017, the resolution professional issued a request for proposal (hereinafter referred to as "RFP"), inter alia, inviting resolution plans for the aforesaid corporate debtor, which was later amended on 08.02.2018. Two resolution plans were submitted on 12.02.2018, one by ArcelorMittal India Private Limited (hereinafter referred to as "ArcelorMittal") and another by Numetal Limited (hereinafter referred to as "Numetal") both of which were found to be ineligible under Section 29-A of the Code. On 02.04.2018, resolution plans were then submitted by ArcelorMittal, Numetal and one Vedanta Limited (hereinafter referred to as "Vedanta"). The resolution plan of ArcelorMittal specifically provided for an upfront payment of INR 35,000 crores in order to resolve debts amounting to INR 49,213 crores. It was stated that unsecured financial creditors shall be paid an aggregate amount of 5% of their admitted claims. Apart from the above, INR 8,000 crores of fresh capital infusion by way of capex and working capital was also to be infused. INR 3,339 crores - being the aggregate admitted claims of operational creditors, other than workmen and employees, was to be paid to the extent of INR 196 crores, but only to trade creditors and government creditors. Small trade creditors, defined as "having claims of less than one crore" were to be honoured in full, as was the claim of workmen and employees of the corporate debtor, amounting to INR 18 crores. Importantly, the resolution applicant empowered the Committee of Creditors to decide the manner in which the financial package being offered would be distributed among the secured financial creditors. Standard Chartered Bank, which was stated to be an unsecured creditor, was to be paid an aggregate amount of 5% of its admitted claims. On 19.04.2018, the Adjudicating Authority directed the Committee of Creditors of the corporate debtor, which by then had been set up by the interim resolution professional, to consider the eligibility of the aforesaid resolution applicants.
(3.) On 10.09.2018, Standard Chartered Bank was classified as a secured financial creditor of the corporate debtor by the resolution professional. On 04.10.2018, this Court declared both ArcelorMittal and Numetal ineligible by virtue of their resolution plans being hit by Section 29-A of the Code. However, an order was passed under Article 142 of the Constitution, stating that one more opportunity be granted to both ArcelorMittal and Numetal to pay off the NPAs of their related corporate debtors within two weeks of the Supreme Court judgment, failing which the corporate debtor would go into liquidation. On 18.10.2018, ArcelorMittal informed the resolution professional and the Committee of Creditors that it had made payments as per the Supreme Court's judgment dated 04.10.2018. However, Numetal did not make any such payment. As a result, on 19.10.2018, ArcelorMittal resubmitted its resolution plan of 02.04.2018, which was then evaluated by the Committee of Creditors on the same date - ArcelorMittal being declared as the highest evaluated resolution applicant vis-a-vis Vedanta. On 25.10.2018, the final negotiated resolution plan of ArcelorMittal was approved by the Committee of Creditors by a 92.24% majority. After several proceedings before the NCLT and the NCLAT, the NCLT, by its judgment dated 08.03.2019 disposed of the application to allow the resolution plan filed by ArcelorMittal as follows: "...we are of the view that the dues of the operational creditors must get at least similar treatment as compared to the dues of the financial creditors on the principle of equity and fair play as well as the Wednesbury Principle of Unreasonableness and the Doctrine of Proportionality, so as to avoid disparity in making payments to the operational creditors having debt value of Rs.1 crore and above (a token of Re.1) and the allegation of discriminatory practice could be ruled out...Hence, in our view, if a reasonable formula for apportionment is worked out so that 85% of the amount offered by the resolution applicant is distributed among the financial creditors and the remaining 15% of the amount is distributed amongst the rest of the operational creditors, then the entire claim of the operational creditors, which comes to around Rs.4700 crore can be substantially paid off or at least the operational creditors can get 50% of their admitted and undisputed claim in the light of the judgment of the Hon'ble Supreme Court in Chitra Sharma v. Union of India (supra). Such object can be achieved, if the financial creditor and the members of the CoC are willing to sacrifice the interest component on their principal loan, because it is established position in the record that the principal loan liability of the corporate debtor company comes to around Rs.35,000 crore in the year 2017 when these IB Petitions were admitted, which includes the interest component also and by giving such hair-cut to the interest component to the extent possible by providing provision for 15% amount for the other operational creditors and stakeholders, we are of the view that debts of the entire operational creditors can be satisfied in a reasonable and fair manner and then such I.A.s preferred by the operational creditors would also become infructuous and this Adjudicating Authority would not be required to deal with the merits of each and every I.A. Thus, this would be beneficial to avoid multiplicity of legal proceedings and to remove any impediment for effective implementation of the resolution plan and to achieve the main theme and object of the present I & B Code.";