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Informist, Tuesday, Jan. 6, 2026

 

--SC rejects UV Asset Reconstruction's IBC plea against Electrosteel Castings

 

NEW DELHI – The Supreme Court Tuesday rejected UV Asset Reconstruction Co. Ltd.'s plea to start insolvency proceedings against Electrosteel Castings Ltd. The top court upheld a National Company Law Appellate Tribunal's 2024 order and National Company Law Tribunal, Cuttack bench's 2022 order that had also refused to start insolvency proceedings against Electrosteel Castings. 

 

The case has its genesis from SREI Infrastructure Finance Ltd. sanctioning a financial assistance of INR 5 billion to Electrosteel Steels Ltd. in 2011. The loan agreement between the parties placed an obligation on Electrosteel Steels' promoter Electrosteel Castings "to arrange for infusion of funds in a form and manner acceptable to SREI at the end of each financial year to comply with the financial covenants in case of breach of such financial covenants".

 

In 2013, Electrosteel Steels committed a default in repaying the financial facilities. On a request by Electrosteel Steels, SREI restructured the loan. In 2017, Electrosteel Castings made a payment of INR 380 million to SREI on behalf of Electrosteel Steels.

 

In 2017, the Kolkata bench of the National Company Law Tribunal admitted State Bank of India's plea to start insolvency proceedings against Electrosteel Steels. In the insolvency process of Electrosteel Steels, SREI filed its claim of INR 5.78 billion, which was admitted by the resolution professional of the debt-ridden company. Thereafter, the Kolkata tribunal approved Vedanta Ltd.'s resolution plan for Electrosteel Steels in 2018.

 

SREI later issued a no objection certificate to Electrosteel Steels confirming the receipt of an amount of INR 2.42 billion for its dues and the allotment of 6.72 million equity shares in Electrosteel Steels. SREI executed an assignment deed in favour of UV Asset Reconstruction assigning the loans payable under the financing documents by Electrosteel Steels, which Electrosteel Castings opposed saying that all the dues were already paid.

 

In 2021, UV Asset Reconstruction filed the insolvency petition against Electrosteel Castings in the Cuttack tribunal. UV Asset said that since Electrosteel Castings was the obliger for the payment of dues of Electrosteel Steels as there was a relationship of guarantee between the parties. However, the Cuttack tribunal said that Electrosteel Castings was not a guarantor to the facilities availed by Electrosteel Steels from SREI and as such there was no financial debt. The tribunal further held that approval of resolution plan for Electrosteel Steels has led to extinguishment and effacement of the entire debt of the debt-ridden company. 

 

In an appeal, the appellate tribunal upheld the rejection of insolvency proceedings against Electrosteel Castings. However, the appellate tribunal said that the findings of the Cuttack tribunal that "approval of the resolution plan has led to extinguishment and effacement of the entire debt of Electrosteel Steels" has to confine to the finding with respect to Electrosteel Castings only and the finding cannot be read to mean that approval of plan has led to extinguishment and effacement of entire debt against third party. Tuesday, the Supreme Court upheld the appellate tribunal's finding on this issue also.

 

At 1137 IST, the shares of Electrosteel Castings Ltd. were down 1.4% at INR 74.65 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Vandana Hingorani

 

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