On Monday, the Supreme Court stayed a controversial order by the National Company Law Appellate Tribunal (NCLAT) about the resolution of Essar Steel. The next hearing will be on August 7. On July 4, the NCLAT had given an unexpected ruling that, if upheld, had the potential to upend all existing and former resolutions under the Insolvency and Bankruptcy Code. Perhaps cognisant of the implications, the Union Cabinet has already stated that it will be amending the IBC.
What did the NCLAT ruling say?
The NCLAT ruling in the Essar Steel case stated that all creditors whether financial or operational have to be treated equally in the case of a “resolution” under the IBC. There are two aspects of this statement that have key implications. One is the equality between financial and operational creditors, and two, the distinction between “resolution” and “liquidation” under the IBC. Read More
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