(Updates with ArcelorMittal's response)
NEW DELHI, Nov 15 (Reuters) - India's Supreme Court cleared the path on Friday for steelmaker ArcelorMittal SA to take over bankrupt Essar Steel, following a legal tussle that has dragged through multiple courts for over two years.
“We are very pleased with the judgment that our resolution plan has been approved. We look forward to the closing of the acquisition soon,” said an ArcelorMittal’s spokesperson.
The highest court said operational creditors could not be treated on a par with financial creditors of a bankrupt company, in a ruling that provides relief to lenders and sets a precedent that could speed-up the resolution of other insolvency cases.
Banks had moved to the Supreme Court earlier this year after an appellate court judgment put the claims of Essar's operational creditors on a par with those of its lenders.
Before that, the core committee of bankers in charge of coming up with a resolution plan had decided financial creditors would get paid 90% of their claims, compared with a 20.5% payout for operational creditors with dues of over 10 million rupees.
However, this was overturned by an appellate tribunal that decided banks would be paid 60.7% of their dues and operational creditors with dues above 10 million could claim 59.6%.
The Supreme Court ruled, however, that the appellate court could not interfere with decisions of the core committee of creditors involved in such resolution processes.
Essar Steel, with debts from banks worth nearly 500 billion rupees ($7 billion), was among the so-called dirty dozen - twelve large steel and other infrastructure companies that defaulted and were referred to India's bankruptcy court in 2017.
The judgment comes as a big reprieve for Indian banks which are struggling with bad loans worth $140 billion.
"The resolution plans of many companies will get crystallised in a very effective manner over the next few months which will free up the banking system for fresh lending," said Vasanth Rajasekaran, partner at Delhi-based Phoenix Legal, which represents some of the lenders to Essar Steel.
($1 = 71.3500 Indian rupees) (Reporting by Suchitra Mohanty and Neha Dasgupta in NEW DELHI; Adiitional reporting by Swati Bhat and Nupur Anand in MUMBAI; Editing by Muralikumar Anantharaman and Mark Potter)