Supreme Court ruling in ArcelorMittal case — An analysis
By Mitali Daryani
The Supreme Court on 4-10-2018 allowed yet another opportunity to mining major ArcelorMittal and Russia's VT B Capital-backed NuMetal to bid for Essar Steel provided they clear their Non-Performing Asset (NPA) dues in two weeks. The bench comprising Justice R. F. Nariman and Justice Indu Malhotra, has also taken this opportunity to interpret and clarify Section 29A of the Insolvency and Bankruptcy Code, 2016. However, the Essar saga is far from over.
Between 31 May to 1 June, the Securities and Exchange Board of India (SEBI) amended a number of securities regulations to provide certain dispensations for listed companies undergoing the corporate insolvency resolution process (CIRP) under the Insolvency and Bankruptcy Code 2016 (IBC). These amendments follow SEBI’s discussion paper of March 2018, which set out specific proposals for adjusting the regulatory framework to allow listed companies to comply with their obligations under securities laws. |
Presently, prior to a listed Indian company filing a scheme (Scheme) before the High Court for merger/de-merger/amalgamation/reduction of capital (Reconstruction) under the Companies Act, 1956 (Companies Act), it is required to first submit the Scheme to the stock exchange for approval. Upon successful completion of the Reconstruction, the company must ensure that at least 25% of its post-issue capital is offered and allotted to the public.
The court has to classify creditors or members if there are such classes and before sanctioning the scheme, to see that their respective interest are taken care of.1
Background
The Supreme Court has again urged the legislature to consider whether the outright prohibition on professional litigation funding and the assignment of bare causes of action continues to be warranted as the ever-increasing cost of litigation is putting access to the courts beyond the reach of many.
While the Court accepted that this is an area in need of careful and considered legislative reform, it warned that unless a real effort is made by the legislature to improve access to justice, it will have "no option" but to step in, "undesirable and all as unregulated change might be."
The Irish Examiner publication is the latest business to be restructured using a so called pre-pack insolvency transaction. “Pre-pack” transactions have been a feature of insolvency sales in other countries such as England and Wales for some years, but until relatively recently had not commonly featured in Irish insolvencies. It has been reported that at least one creditor has initiated proceedings to challenge the Irish Examiner transaction.
In the matter of Cognotec Ltd (in receivership)
Section 60(14) provides that a transaction in breach of section 60 is voidable against any person who had notice of the facts which constitute the breach.
The company sought to void the debenture which secured the loan on the basis that section 60 had not been complied with and the receiver appointed on foot of the debenture brought a motion for directions.
The court held that:
As part of the IMF/EU bailout, Ireland will need to put draft legislation before the Dail to facilitate the creation of a legal framework for dealing with financial institutions on the verge of collapse. This legal framework is known as a Special Resolution Regime (SRR).
The rapid downturn in the economy means company directors are faced with new challenges, possibly on a greater scale and more complex than ever before. Directors are responsible for managing the affairs of a company, identifying risk and ensuring that there is a strategy and a system in place to deal with those risks.
Weak and inadequate management by the directors may contribute to a weak financial performance and can lead to damage to business reputation, adverse media attention and damage to the business itself.