‘Conflict of Equity and Equality between creditors” 
In the case of committee of Creditors of Essar Steel India Limited through Authorized Signatory v. Satish Kumar Gupta

By- Ayushman Das and Abhay James

In March 2019, National Company Law Tribunal (NCLT) approved ArcelorMittal’s bid for Essar Steel, provided that the operational creditors with an exposure of an amount above INR 1 Crore would forego the entire amount. Whilst the NCLT approved ArcelorMittal's original resolution plan, it directed the CoC to consider sharing 15% of the amount recovered from the profits made during the CIRP with the operational creditors of Essar Steel, which was later challenged by NCLAT.
The (CoC) approved the resolution plan offered by the ArcelorMittal. Under the resolution plan, ArcelorMittal offered payment of about ₹42,000 crore to the financial creditors and capital infusion of ₹8,000 in the next few years. However, the offer did not have much given for the operational creditors to Essar Steel.
In 2019, the National Company Law Appellate Tribunal (NCLAT) cleared the CoC’s plan but changed the financial distribution plan by ordering an equal recovery plan for all creditors, including financial and operational creditors.
The NCLAT ruled that the waterfall mechanism envisaged under Section 53 of the Code could not be applied during the CIRP. The NCLAT further directed redistribution of proceeds payable under the resolution plan such that all financial creditors were paid an amount of 60.7% of their admitted claims and operational creditors (with an amount of claim equal to or greater than INR 1 crore) were paid 60.26% of their admitted claim, and operational creditors (with an amount of admitted claim under INR 1 crore) were paid in full. Aggrieved by the decision, the financial creditors amongst others challenged the decision of the NCLAT before the Supreme Court.

Supreme Court Judgement- Highlights
Wisdom of CoC: The CoC may approve a resolution plan by a vote of not less than 66% of the voting share of the financial creditors after considering the 'feasibility and viability' of such resolution plan and other requirements as may be prescribed by the Insolvency and Bankruptcy Board of India Regulations, 2016.
Principle of Equality: The Court held that the equality principle cannot be stretched to treating unequal equally.
Restriction on Tribunals: Tribunals have no “residual equity jurisdiction” to interfere in the merits of a business decision taken by the CoC. 
Liability of guarantee. 
Relaxation of Resolution Deadline: The Supreme Court has done away with the 330-day mandatory deadline for the resolution of insolvency and bankruptcy cases after which liquidation is invoked. 
Analysis of the Judgement
The judgment is wise and addresses all the issues put forward by the financial creditors. With the sale of Essar steel, the banks would recover almost 90% of the dues worth nearly INR 40,000 crores, that is owed by the company. The estimated amount that the operational creditors would receive is almost INR 120 crores. This might help to improve the financial position of weak public sector banks and strengthen the profitability given that the dues owed by Essar Steel were fully written off by almost all lenders. The judgment would also put rest to the major questions related to the treatment of operational and financial creditors as well as the role of the CoC, the NCLT and the NCLAT in the CIRP of a corporate debtor under the Code.
The Supreme Court has precisely distinguished between secure and unsecured creditors which would be important as far as the banking industry is concerned. Also, recognition has been given to the commercial wisdom of the lenders by reinstating the CoC to be the primary decision-maker. It is expected that this ruling of the Supreme Court will result in a large-scale disposal of pending appeals before NCLAT and disposals at NCLT on similar questions of law.
Hence, it can be concluded that the Honourable Supreme Court has taken the right decision by addressing all the relevant questions and by giving precise differentiation which would help the banking industry as well

The NCLT decision backfiring left allot of doubt in the minds of the creditors, that is operational . The financial creditors and operational creditors live a life of equity, which was being prophaced. The consumer analysis that we put forward is as simple that the behavior of the consumers who are the creditors change with time , but the behavior of the consumer in here did not leave any iota of doubt in the law. The consumers who are the creditors had to imbibe the law and understand it in a proper way to interpret it’s true meaning, the misconceptions of the law can sometimes cause differential behavior.
Resolution and liquidation needed to be understood at length, this time around in the Essar steel v Satish gupta the process was first of resolution.  This basically means that there are two outcomes in the IB code one where the sale of the existing business takes place and the other  where the sale of the existing assets of the company takes place. The question that we must impose is to understand whether the company can revive itself at that level that it can pay off its creditors. If yes then they should go for resolution keeping in mind the balancing the interests  of all stakeholders. Therefore the resolution plan decided by the COC must  not be confused by the waterfall mechanism under the section 53(Distribution of assets mechanisms) of the IBC for distribution of assets.
The decision laid down is a simple analysis of the event at large, the Adjudicating authority cannot exercise equity or discretion outside the section 30(2)( The resolution professional shall examine each resolution plan received by him to confirm that each resolution plan) of the code when it is about the resolution  plan submitted by the COC, it gave a good explanation as what means as a difference between secured and unsecured creditors, the SC stated that it didn’t matter if the creditor was secured, unsecured, operational or financial the creditor will be paid dues as according to the class they belong to. The SC notified that the Adjudicating authority has no powers under Section 31(Approval of resolution plan) of the code and section 60(5)(Role of Adjudicating Authority)of the code to intervene in any matter which relates to the commercial wisdom of the  committee of creditors, it only talks about judicial review of the laws being complied with under the section 30(2) and (4)(  The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent. of voting share of the financial creditors, after considering its feasibility and viability, the manner of distribution proposed, which may take into account the order of priority amongst creditors as laid down in sub-section (1) of section 53, including the priority and value of the security interest of a secured creditor and such other requirements as may be specified by the Board)

Under the UNCITRL Not in relation with liquidation and only for the resolution plan that would be submitted are in the hands of the committee of creditors that have most powers and nothing much can be changed by the corporate debtor visa vis resolution professional. Most importantly under the section 30(4) 66% of the vote share has gone under the belt of the financial creditors because when it comes to saving the company from debt, aiding them financially they are the biggest players in their realm. If the equality theory is actually accepted as was before in the NCLAT, the theory would have zero application in it’s totality, as the rights of the creditors are very different from each other, if actually this policy was applied then financial creditors would be happier to opt for liquidation procedure rather than resolution as they would be having better rights if the corporate gets liquidated rather than a resolution process being accepted which gives the company another long term chance, technically which would be more time taking in this procedure. This would defeat the entire purpose of the code to facilitate what is actually required  from the code.
The distinction and clarity was already given and explained in an earlier case along with Bankruptcy law reform committee, when the difference between the operational creditors and financial creditors was being called out to be violative of Article 14 of the constitution under the Corporate Insolvency Procedure stating that the operational creditors were left at the mercy of the Committee of Creditors and majority vote of the FC. The BLRC report explained in the case states that “since equality is only among equals, no discrimination results if the Court can shown that there is an intelligible differentia which separates two kinds of creditors”  The court established the exact purpose of the code which is to ensure preservation of the corporate debtor and that all the stakeholders in the company get their equal share. Therefore there is no violation. According to section 24 an operational creditor is not part of the COC until it has a share of 10%. The wisdom to decide who gets what is under the COC, it should be seen that in the Swiss ribbon case that under section 30(4) and regulation 39(3), the Adjudicating authority can pass or not pass the resolution plan  only muster under the code, the commercial authority lies in the hands of COC.