Tribunal admits CIRP applications against ESSAR Steel by SCB and SBI

The tribunal admitted the applications by Standard Chartered Bank (SCB) and State Bank of India (SBI) for the initiation of Corporate Insolvency Resolution Process (CIRP) against ESSAR Steel India Limited. The tribunal found the applications complete, ESSAR in default of financial debts, and appointed Mr. Satish Kumar Gupta as the Interim Resolution Professional (IRP). It was determined that CIRP would benefit ESSAR and stakeholders, leading to the declaration of a moratorium and the commencement of necessary actions for the resolution process.

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Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Standard Chartered Bank (SCB) and State Bank of India (SBI).
2. Competency of the person signing the application for SBI.
3. Interpretation of the word "may" in Section 7(5)(a) of IBC.
4. Consideration of Debt Restructuring Process and its impact on CIRP.
5. Appointment of Interim Resolution Professional (IRP).

Issue-wise Analysis:

1. Initiation of Corporate Insolvency Resolution Process (CIRP):
SCB and SBI initiated CIRP against ESSAR Steel India Limited (ESSAR) under Section 7 of IBC. SCB provided a loan of USD 413,000,000 to ESSAR's subsidiary, secured by ESSAR's guarantee. ESSAR failed to repay, leading to a default. SBI granted a total debt of Rs. 14860.82 Crores to ESSAR, which also defaulted. Both banks filed applications with supporting documents, including financial debt records and evidence of default.

2. Competency of the Person Signing the Application for SBI:
ESSAR challenged the competency of the person signing SBI's application, arguing that only the Central Board could authorize such actions. However, the tribunal found that SBI's Deputy General Manager, Mr. Kshitij Mohan, had valid authority under Regulations 76 and 77 of the State Bank of India General Regulations, 1955, supported by a Gazette Notification. Hence, the objection was dismissed.

3. Interpretation of the Word "May" in Section 7(5)(a) of IBC:
SCB argued that "may" in Section 7(5)(a) should be read as "shall," making it mandatory for the Adjudicating Authority to admit the application if complete. ESSAR contended that "may" indicates discretion. The tribunal, referencing the Gujarat High Court's judgment, concluded that the Adjudicating Authority must exercise discretion judiciously, considering all facts and circumstances, and not mandatorily admit every application.

4. Consideration of Debt Restructuring Process and Its Impact on CIRP:
ESSAR argued that ongoing Debt Restructuring Process should preclude CIRP, fearing it would disrupt operations and stakeholder interests. The tribunal noted that the Debt Restructuring Process had been ongoing since 2014 without resolution and emphasized that CIRP is a time-bound process aimed at reviving the company. The tribunal held that CIRP would not hinder the Debt Restructuring Process and could include it in the Resolution Plan.

5. Appointment of Interim Resolution Professional (IRP):
SCB and SBI proposed different IRPs. SCB's application was earlier, but SBI's proposal was backed by the Joint Lenders Forum (JLF) after extensive evaluation. The tribunal appointed Mr. Satish Kumar Gupta, proposed by SBI, as the IRP, considering the thorough selection process and the higher value of debt owed to JLF.

Findings and Orders:
- The applications by SCB and SBI were complete, and ESSAR had defaulted on financial debts.
- No disciplinary proceedings were pending against the proposed IRPs.
- CIRP was deemed beneficial for ESSAR and its stakeholders.
- Mr. Satish Kumar Gupta was appointed as the IRP.
- SBI was directed to make a public announcement of CIRP and call for claims.
- A moratorium was declared, prohibiting certain actions against ESSAR during the CIRP.

The tribunal admitted both applications, initiated CIRP, and directed necessary actions to commence the process.

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