Laxmi Mittal`s Arcelor to enter India`s Essar Steel |
The Supreme Court of India has cleared the line for Billionaire steel tycoon Lakshmi Mittal`s $6 billion bid for the bankrupt Essar Steel. Essar was owned by the Ruia family earlier. At the same time, the latest Supreme Court verdict has set a precedent on how the sale proceeds of a bankrupt company should be distributed. According to the Supreme Court order, The ultimate discretion on the distribution of funds was with the Committee of creditors. The case had landed up at the Supreme Court because the appellate tribunal of the bankruptcy court had held that the funds from the sale of a bankrupt company should be equally distributed between both financial creditors i.e. banks and operational creditors who are owed money by the insolvent company. The Supreme Court has set aside that order and gives back the power to decide how to distribute the money. It also added that the banks should also balance the interests of all stakeholders. This order has led to a rally in state-owned banking stocks due those who have lent money to Essar Steel will get to recover a larger share from the money received from Lakshmi Mittal`s ArcelorMittal and this order also sets a precedent for other bankruptcy cases. Essar Steel owes about ₹49,000 crore to a dozen banks including the State Bank of India (SBI), whose share price surged over 5% after the order.
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