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State PCS

  • 16 Nov 2019
  • 21 min read
Indian Economy

Essar Insolvency Case

Why in News

The Supreme Court has recently given its judgement in the Essar Insolvency case. The Judgement has paved the way for ArcelorMittal and Nippon Steel to take over debt-laden Essar Steel.


  • In March 2019, National Company Law Tribunal (NCLT) approved global steel-giant ArcelorMittal’s bid for Essar Steel.
  • The Committee of Creditors (CoC) approved the resolution plan offered by the ArcelorMittal. Under the resolution plan, ArcelorMittal offered an advance cash 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 for 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.

Highlights of the Judgement

  • Wisdom of CoC: It is the commercial wisdom of the requisite majority (66%) of the CoC under the Insolvency and Bankruptcy Code (IBC) to negotiate and accept a resolution plan, which may involve differential payment to different classes of creditors.
  • Principle of Equality: The Court held that the equality principle cannot be stretched to treating unequals equally. This will destroy the very objective of the IBC to resolve stressed assets. Equitable treatment is to be accorded to each creditor depending upon the class to which it belongs: secured or unsecured, financial or operational.
  • Restriction on Tribunals: Tribunals have no “residual equity jurisdiction” to interfere in the merits of a business decision taken by the CoC. This implies that the NCLT and NCLAT cannot interfere with the commercial decisions taken by the CoC.
  • Financial vs Operational Creditors: The Court upheld the primacy of financial creditors over operational creditors in the distribution of funds received under the corporate insolvency scheme.
    • The Court explained that financial creditors are capital-providers for companies, i.e. help companies to purchase assets and run business operations.
    • Operational creditors, in a way, are beneficiaries of amounts lent by financial creditors.
  • 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. The bench allowed a bit of flexibility by allowing exceptions where the resolution plan is on the verge of being finalised.
    • The 330-day mark is violation of Article 14 (right to equal treatment ) of the Constitution and Article 19(1)(g) ( Right to carry any business) of the Constitution.

Likely Impact of the Judgement

  • Impact on Banks: Banks will recover Rs. 42,000 crore against admitted debts of Rs. 49,473 crore- a recovery of about 85% compared to the average recovery of 53% in other resolution cases. This would help banks in boosting their capital adequacy.
  • Speedy Resolution: The verdict is likely to reduce legal wrangling between financial and operational creditors and accelerate resolution process.
  • Foreign Investment: It will attract investors who were getting wary of the nation’s bankruptcy process.
    • India is trying to attract foreign capital to its bad loan cleanup, as it battles the worst nonperforming loan ratio among the world’s major economies.
  • Upheld the Spirit of IBC: The removal of mandatory 330-day deadline will facilitate resolution, the ultimate objective of the IBC.

Insolvency Resolution Process in India

  • Eligibility: Under IBC, companies (both private and public limited company) and Limited Liability Partnerships (LLP) can be considered as defaulting corporate debtors.
    • A corporate debtor is any corporate organization which owes a debt to any person.
  • Default Amount: The Insolvency and Bankruptcy Code can be triggered if there is a minimum default of Rs 1 lakh. This process can be triggered by way of filing an application before the National Company Law Tribunal (NCLT).
  • Resolution Initiation: The process can be initiated by two classes of creditors which would include financial creditors and operational creditors.
    • Creditors: A Creditor means any person to whom a debt is owed and includes a financial creditor, an operational creditor, etc.
    • Financial Creditors: The financial creditor in simple terms is the institution that provided money to the corporate entity in the form of loans, bonds etc. E.g. banks.
    • Operational Creditors: An operational creditor is the entity who has a claim for providing any of the four categories to the defaulted corporate- goods, services, employment and Government dues (central govt, state or local bodies).
  • Appointment of Interim Resolution Professional: As soon as the matter is admitted by the NCLT, the NCLT proceeds with the appointment of an Interim Resolution Professional (IRP) who takes over the management of the defaulting debtor.
  • Committee of Creditors (CoC): A committee consisting only of the financial creditors i.e. the CoC is formed by the IRP.
    • Only operational creditors having aggregate dues of at least 10% of the total debt are invited into the meeting of CoC (Operational creditors are not a member of CoC). The operational creditors don’t have any voting power.
  • Corporate Insolvency Resolution Process (CIRP): It includes necessary steps to revive the company such as raising fresh funds for operation, looking for new buyer to sell the company as going concern, etc.
    • The CoC takes a decision regarding the future of the outstanding debt owed to it. The resolution plan can be implemented only if it has been approved by 66% of the creditors in the CoC
  • Liquidation Proceedings: In the event a resolution plan is not submitted or not approved by the committee of creditors (COC), the CIRP process is deemed to have failed. In such a situation the liquidation proceedings commences subject to the order of the tribunal.

Source: TH

Indian Polity

Contempt of Court

Why in News

Recently, the Supreme Court of India has held former Ranbaxy promoters guilty of contempt for violating its order.

  • The expression ‘contempt of court’ has not been defined by the Constitution.
  • As per the Contempt of Courts Act 1971, contempt refers to the offence of showing disrespect to the dignity or authority of a court.
  • The act divides contempt into civil and criminal contempt.
    • Civil contempt: It is willful disobedience to any judgment, decree, direction, order, writ or other processes of a court or wilful breach of an undertaking given to the court.
    • Criminal contempt: It is any publication which may result in:
      • Scandalising the court by lowering its authority.
      • Interference in the due course of a judicial proceeding.
      • An obstruction in the administration of justice.
  • However, innocent publication and distribution of some matter, fair and reasonable criticism of judicial acts and comment on the administrative side of the judiciary do not amount to contempt of court.

Contempt of Court Act,1971

  • The act defines the power of courts to punish for their contempt and regulates their procedure.
  • It was amended in 2006 to include the defence of truth under Section 13 of the original legislation. Implying that the court must permit justification by truth as a valid defence if it is satisfied that it is in the public interest.

Punishments for Contempt of Court

  • The supreme court and high courts have the power to punish for contempt of court, either with simple imprisonment for a term up to six months or with fine up to 2,000 or with both.
  • In 1991, the Supreme Court has ruled that it has the power to punish for contempt not only of itself but also of high courts, subordinate courts and tribunals functioning in the entire country.
  • On the other hand, High Courts have been given special powers to punish contempt of subordinate courts, as per Section 10 of The Contempt of Courts Act of 1971.

Need for Contempt Law

  • The purpose of contempt jurisdiction is to uphold the majesty and dignity of the judiciary.
  • Contempt powers help judges to do their duties of deciding cases without fear, favour, affection or ill will.

Constitutional Background

  • Article 129: Grants Supreme Court the power to punish for contempt of itself.
  • Article 142(2): Enables the Supreme Court to investigate and punish any person for its contempt.
  • Article 215: Grants every High Court the power to punish for contempt of itself.

Issues with Contempt Law

  • Article 19(1)(a) of the Constitution gives the right to freedom of speech and expression to all citizens, while “contempt provisions” curb people’s freedom to speak against the court’s functioning.
  • The law is very subjective which might be used by the judiciary arbitrarily to suppress their criticism by the public.

Source: TH

International Relations


Why in News

According to the International Energy Agency (IEA), the Organisation of the Petroleum Exporting Countries (OPEC+) plus might face sharp demand fall due to a recent surge in crude oil production from the countries like USA, Norway, and Guyana.

  • The non-OPEC countries which export crude oil are termed as OPEC plus countries.
  • OPEC plus countries include Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan.

Organization of the Petroleum Exporting Countries (OPEC)

  • The Organization of the Petroleum Exporting Countries (OPEC) is a permanent, intergovernmental organization, created at the Baghdad Conference in 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela.
  • It aims to manage the supply of oil in an effort to set the price of oil in the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.
  • It is headquartered in Vienna, Austria.
  • OPEC membership is open to any country that is a substantial exporter of oil and which shares the ideals of the organization.
  • Gabon terminated its membership in January 1995. However, it rejoined the Organization in July 2016.
  • As of 2019, OPEC has a total of 14 Member Countries viz. Iran, Iraq, Kuwait, United Arab Emirates(UAE), Saudi Arabia, Algeria, Libya, Nigeria, Gabon, Equatorial Guinea, Republic of Congo, Angola, Ecuador and Venezuela are members of OPEC.

International Energy Agency

  • The International Energy Agency (IEA) is an autonomous organisation which works to ensure reliable, affordable and clean energy.
  • It was established in the wake of 1973 (set up in 1974) oil crisis after the OPEC cartel had shocked the world with a steep increase in oil prices.
  • It is headquartered in Paris, France
  • The IEA has four main areas of focus, i.e. 4Es:
    • Energy security,
    • Economic development,
    • Environmental awareness and
    • Engagement worldwide.
  • India became an associate member of the International Energy Agency in 2017.
  • Mexico officially became the International Energy Agency’s 30th member country in February 2018, and its first member in Latin America.


Important Facts For Prelims

Child Abuse Prevention and Investigation Unit

Why in News

The Central Bureau of Investigation (CBI) has set up an Online Child Sexual Abuse and Exploitation (OCSAE) Prevention/Investigation Unit at its headquarter in New Delhi.

  • The unit will function under the CBI’s Special Crime Zone.
  • The unit's territorial jurisdiction would be throughout the country.

Functions of the Unit

  • It will probe offences covered under various provisions of the Indian Penal Code (IPC), the Protection of Children from Sexual Offences (POCSO) Act and the Information Technology (IT) Act, apart from other relevant laws.
  • It will collect and disseminate information on online child sexual abuse and exploitation.


  • The incidence of online child sexual abuse and exploitation generally transcends international borders.
  • Numerous references related to dissemination of Child Sexual Abuse Material (CSAM) have been received from the Interpol and other national/international organisations.

Central Bureau of Investigation

  • CBI is the premier investigating police agency in India.
  • It functions under the superintendence of the Ministry of Personnel, Pension & Public Grievances.
  • However for investigations of offences under the Prevention of Corruption Act, its superintendence vests with the Central Vigilance Commission.
  • It is the nodal agency in India which coordinates investigation on behalf of Interpol member countries.

Source: TH

Important Facts For Prelims


  • Ain-i-Akbari is a 16th century document.
  • Written by: Akbar’s court historian Abu'l Fazl in Persian language.
  • Deals with: the administration of Mughal Emperor Akbar.
  • Background: Beginning in 1589, Abu’l Fazl worked on the ‘Akbar Nama’ for thirteen years. The Akbar Nama is divided into three books:
    • The first book dealt with Akbar’s ancestors.
    • The second recorded the events of Akbar’s reign.
    • The third is the Ain-i Akbari. It deals with Akbar’s administration, household, army, the revenues and geography of his empire. It provides rich details about the traditions and culture of the people living in India. It also got statistical details about crops, yields, prices, wages, and revenues.
  • In the early twentieth century, the Akbar Nama was translated into English by Henry Beveridge.
  • Other Literary Work during Akbar’s Reign:
Sr. No. Book Author
1. Muntakhab ul-Tawarikh (also known as Tarikh-i-Bidauni) Abdul Qadir Badaoni
2. Tabakat-i-Akbari Nizamuddin
3. Takmila-i-Akbarnama Inayatulla
4. Sursagar (written in Brij Bhasha) Sur Das
5. Ramcharitmanas (written in Awadhi- eastern hindi dialect) Sant Tulsi Das

Source: TH

Important Facts For Prelims

Jharkhand Foundation Day

On November 15, the State of Jharkhand celebrated its foundation day. The state was carved out of Bihar in 2000 after the Parliament passed the Bihar Reorganization Act, 2000.

  • The day coincided with the birth anniversary of tribal leader Birsa Munda also known as Bhagwan Birsa.

Birsa Munda

  • Born in 1875 in the Munda tribe. He is often referred to as ‘Dharti Abba’ or the Earth Father.
  • He led the rebellion that came to be known as Ulgulan (revolt) or the Munda rebellion against the British government-imposed feudal state system.
  • He awakened the masses and sowed the seeds of revolt in them against the landlord as well as the Britishers.
    • He organized masses to stop paying debts/interest to moneylenders and taxes to the British. By this, he led a revolt to bring an end to Victorian rule and the establishment of Munda Rule in Jharkhand (erstwhile Bengal Presidency region).
  • He formed two military units- one for military training and armed struggle, the other for propaganda. He combined religion with politics and traveled across villages giving discourses and building a politico-military organization.
  • His struggle against the exploitation and discrimination against tribals led to the passing of the Chotanagpur Tenancy Act in 1908 which restricted the passing of land from the tribal people to non-tribals.

Source: IE

Important Facts For Prelims

Sisseri River Bridge

Recently, the Defence Minister inaugurated the Sisseri River Bridge located at lower Dibang Valley in Arunachal Pradesh. The 200m long bridge provides connectivity between Dibang Valley and Siang.

  • The bridge was constructed by ‘Project Brahmank’ of Border Roads Organisation (BRO).
    • There are four projects of BRO in Arunachal Pradesh namely Vartak, Arunank, Brahmank, and Udayak to not only meet the strategic requirement of India but also contribute to the socio-economic development of the region.
  • This bridge is strategically important from the military viewpoint and will be a part of Trans Arunachal Highway.
    • The Trans-Arunachal Highway was ₹10,000-crore two-lane highway project that aimed to connect Tawang in the west to Kanubari in the east of Arunachal Pradesh. It was conceived in 2008.
  • The Government has adopted the Border Area Development Programme (BADP) for infrastructural upgradation of the area, necessary for the security of the North-East and the entire country.

Border Area Development Programme

  • BADP was started in the year 1986-87 for balanced development of border areas of states bordering Pakistan, namely, Jammu & Kashmir, Punjab, Gujarat, and Rajasthan. It was subsequently extended to all the land borders.
  • The programme is administered by the Department of Border Management of the Ministry of Home Affairs (MHA).
  • States are provided a 100% non-lapsable Special Central Assistance fund under BADP to meet the special developmental needs and well being of the people living in remote and inaccessible areas situated near the international border.
  • The programme was amended in 2015 to provide the provision for third party inspection and quality control mechanism under MHA for random inspections of the BADP schemes.

Source: PIB

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