Gujarat HC dismisses Essar plea challenging insolvency proceedings

Ivan Schwartz
July 17, 2017

Essar Steel will undergo insolvency proceedings as the Gujarat High Court dismissed the company's plea against the Reserve Bank of India (RBI).

With the latest order, the interim stay granted on the proceedings against Essar Steel under the NCLT stands vacated and insolvency proceedings under the NCLT can, hence, be resumed by the lenders led by State Bank of India (SBI).

Essar Steel owes lenders around Rs 45,000 crore ($6.99 billion), of which Rs 31,670 crore had become non-performing as of 31 March 2016, the Mint newspaper previously reported citing court hearings.

RBI said in its submission to the court that the 13 June press statement was based on the recommendation of a high-level internal committee and that the central bank had no documentary evidence to produce other than the press release itself to support the decision.

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That RBI's decision in picking these 12 accounts was arbitrary inasmuch as no opportunity of being heard was provided to these companies that were being referred to.

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. Gujarat's Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co. However, Essar continued to object to being clubbed with other 11 NPA accounts, whereas it was in discussion with banks for a financial restructuring. "The company was aware about SBI's action". Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd. You can not play games with the court. "This court is being misled", he had said during the arguments. "This court is beingmisled", the RBI lawyer had said.

The company has a debt of almost Rs 42,000 crore. The counsel for the RBI, also told the court that the non-performing assets (NPA) of the company rose from Rs 31,671 crore till March 31, 2016 to Rs 32,864 crore till March 31, 2017 this year.

Thus, a total of 12 accounts constituting of 25% of gross NPAs qualified for insolvency.

Other reports by GizPress

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