The CoC said that this decision would discourage banks from initiating insolvency proceedings against any defaulting company. This decision means that the financial creditors would have to take a bigger loss on their outstanding dues and this is not in public interest, it added.

While approving ArcelorMittal’s Rs 42,000-crore offer for Essar Steel, the NCLAT had on last Thursday modified a resolution plan cleared by the CoC, holding that the secured creditors including SBI, IDBI Bank and Canara Bank will get Rs 30,030 crore, or 60.7% of their Rs 45,559 crore claims, and the rest will go to operational creditors, treating them at par with the financial creditors.

Operational creditors had made total claims of Rs 19,719 crore and could get Rs 11,969 crore, or 59.6%, as per the NCLAT’s order.

The earlier plan approved by the lenders had provided for 90% recovery for all financial creditors and around 20.5% for operational creditors with dues of more than Rs 1 crore.

It also said that the Supreme Court in its earlier ruling had held that the financial creditors and operational creditors could not be treated at par.

The CoC in its appeal before the apex court stated that it has power to deal with all commercial aspects of the resolution plan submitted by ArcelorMittal India.

Citing the NCLAT’s earlier order, it said that what should be the percentage of claim amount payable to anyone — financial creditor or the operational creditor or secured creditor or unsecured creditor — can be looked into by the CoC.

It even cited the 2015 Banking Law Reforms Committee report that empowered the CoC to decide the distribution amongst the stakeholders lenders.

The NCLAT had held that the creditors can only look at the viability of a resolution plan and have no role in deciding the distribution of funds.