SC rejects insolvency plea against ECL

New Delhi: The Supreme Court on Tuesday refused to allow UV Asset Reconstruction Co to initiate insolvency proceedings against Electrosteel Castings Ltd (ECL), while upholding a 2024 ruling of the National Company Law Appellate Tribunal (NCLAT). The issue before the apex court was whether approval of the resolution plan of Electrosteel Steels Ltd (ESL) resulted in extinguishment of the entire debt, thereby barring any claim against ECL as a security provider or erstwhile promoter.

While dismissing two separate appeals filed by UV Asset Reconstruction Company and ECL against the NCLAT's January 24, 2024 judgment, a Bench comprising Justices Sanjay Kumar and Alok Aradhe held that approval of ESL's resolution plan "does not result in extinguishment of the entire debt so as to bar any claim against ECL as a security provider/third-party surety".

The court also ruled that ECL was not a corporate guarantor for the loan availed by ESL.


The apex court said Clause 3.2(ix) of the resolution plan clearly provided that rights against any third party, including a security provider or existing promoter, in relation to any portion of unsustainable debt secured or guaranteed by such third parties, would not be extinguished.