India’s insolvency tribunal has made a dangerous decision. Unless its judgment is quashed, credit costs for India Inc. will surge, shares of state-run banks will swoon and foreign investors will flee.
The case concerns the country’s most high-profile bankruptcy, Essar Steel India Ltd. Insolvency judges recently ruled that creditors whose claims are backed by collateral won’t get preferential treatment in the $6 billion sale of the company’s plant to ArcelorMittal. Secured creditors will stand in line with unsecured creditors.