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Insolvency proceeding: Gujarat High Court dismisses Essar Steel plea against RBI directive

17 July 2017, 03:58 | Jan Cross

Gujarat High Court dismisses Essar Steel's plea against RBI; insolvency process to continue

Gujarat HC dismisses Essar Steel's plea against RBI

The Gujarat High Court on Monday disposed of the petition moved by Essar Steel challenging the insolvency proceeding against it by Reserve Bank of India without granting any relief to the company.

Essar Steel in its petition to the court had challenged a June 13 directive of RBI, in the form of a press release, in which the banking regulator directed banks to refer a dozen cases, including Essar Steel, directly to NCLT. The RBI had identified top 12 NPA accounts, of which Essar Steel was one of them.

On July 14, it had reserved its order for Monday on Essar Steel's plea against the June 13 RBI circular to banks to act on priority under Insolvency and Bankruptcy Code (IBC) against the 12 defaulting companies including the debt laden Essar Steel.

The Gujarat High Court today refused to grant any relief to Essar Steel for the insolvency proceedings initiated against it at the Ahmedabad Bench of NCLT.

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The company has objected to being clubbed with 11 other defaulters. Gujarat's Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.

The company was challenging the RBI's directive, not the SBI's decision. Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd. At the time, lenders were already discussing a restructuring plan approved by the company's board, it said.

An RBI circular last month asked the banks to initiate action against Essar Steel and eleven other firms with over Rs 5,000 crore of outstanding loans each under the IBC. "This court is being misled", he had said during the arguments. Rs 31,671 crore of the total sum had been deemed non-performing on March 31, 2016. It also said that it has repaid nearly Rs 3,467 crore in last one year, adding that it employs 4,500 people and that if action was taken under the provisions of sections 7, 16 and 17 of the Insolvency and Bankruptcy Code (IBC), the administration of the company would go into hands of interim resolution professionals (IRP) and it would result in the closing down of the company. While arguing before the court, the RBI counsel had informed the court that these 12 NPA accounts represent 25 per cent of the total NPA of Rs 7,50,000 crore, which forms 5 per cent of the country's GDP.



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