Gujarat HC Dismisses Essar Steel's Petition Against RBI

The Gujarat High Court on Monday dismissed Essar Steel's writ petition challenging the insolvency proceedings brought against it by a consortium of banks on RBI directives. PTI file

The Gujarat High Court on Monday granted no relief to Ruias-led Essar Steel against the insolvency proceedings initiated against it by its lenders under the National Company Law Tribunal (NCLT).

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 had argued that it should have been given an opportunity to present its case before the Reserve Bank of India made a decision to include the company among 12 defaulters that would be referred to bankruptcy court. Against this initiative the Essar Steel moved High Court and got a stay on all proceedings against the company at tribunal.

The company was challenging the RBI's directive, not the SBI's decision. Instantly acknowledging this error, the RBI told the Gujarat High Court that it would withdraw this line from the press release, and did so by the means of a corrigendum. 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.

Essar Steel was referred to the NCLT despite the fact that it was in an advanced stage of finalising a restructuring proposal in accordance with earlier RBI circulars, it argued.

The RBI had in June asked lenders to start insolvency proceedings against 12 companies, as part of new powers it gained this year to help the country cut down on the more than $150 billion in stressed assets in the banking system. However, Essar continued to object to being clubbed with other 11 NPA accounts, whereas it was in discussion with banks for a financial restructuring. "This court is beingmisled", the RBI lawyer had said. According to the RBI, top 12 bad loan accounts make up for Rs 2.5 lakh crore of bad debts, or 25% of the total.

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