The key decisions and observations made by SC, in Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta[1] on various issues under the Insolvency and Bankruptcy Code, 2016 (‘IBC’)[2] are: (i) Equitable treatment has to be given to all the creditors who are similarly situated. However, all classes cannot be treated equally as the equality principle cannot be stretched to treating unequals equally, as that will destroy the very objective of the IBC – to resolve stressed assets; (ii) With respect to the recently introduced requirement for resolution plans under the amendments passed in August, 2019 i.e., ‘fair and equitable treatment’, SC held that there is no residual jurisdiction not to approve a resolution plan on the ground that it is unfair or unjust to a class of creditors, so long as the interest of each class has been looked into and taken care of; (iii) The Committee of Creditors (‘CoC’) has the freedom to distribute and classify amounts to secured creditors on the basis of the value of their security. The CoC is allowed to appoint sub-committees to act on its behalf for certain administrative purposes, but such acts need to be ratified by the CoC. The NCLT or the NCLAT should not interfere with the decision of the CoC as long as the IBC provisions have been complied with; (iv) Profits of the corporate debtor during corporate insolvency resolution process (‘CIRP’) are not to be utilized for payment of debts of any creditor. All claims must be submitted to and decided by the Resolution Professional to ensure that a prospective resolution applicant knows exactly what has to be paid in order to take over the Corporate Debtor on a ‘fresh slate’; (v) The National Company Law Tribunal (‘NCLT’) or the National Company Law Appellate Tribunal (‘NCLAT’) may, in certain exceptional circumstances, extend the CIRP period and grace period beyond 330 days and 90 days respectively; and (vi) The impugned NCLAT decision in this matter that a guarantor would be relieved from any payment, once the debt payable by the corporate debtor is cleared in view of the approval of the resolution plan, has been set aside by the SC as it is contrary to Section 31(1) of the IBC (approval of resolution plan by NCLT). Thus, an approved resolution plan is binding on all stakeholders, including guarantors.

[1] Civil Appeal No. 8766-67 of 2019 [2] Please see our separate client alerts reporting various developments pertaining to IBC from time to time.