HC denies any relief to Essar Steel in insolvency case

Gladys Abbott
July 17, 2017

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.

State Bank of India, which leads a consortium of banks under the Joint Lenders' Forum for corporate debt restructuring of Essar Steel and is a respondent in the case, has hired Shardul Amarchand Mangaldas and Co.

Essar Steel had moved the High Court on July 4 challenging the RBI's press release dated June 13, which directed banks to refer top 12 NPA accounts to the NCLT under the newly introduced Insolvency and Bankruptcy Code (IBC). Essar Steel's counsel Mihir Thakore had argued that the SBI and other lender banks under the Joint Lenders Forum may not have chose to approach the National Company Law Tribunal (NCLT) for insolvency proceedings had the RBI not issued such a circular.

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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. Shares of most of the nine listed companies out of the 12 on the RBI's list are on a downtrend since then. However, Essar continued to object to being clubbed with other 11 NPA accounts, whereas it was in discussion with banks for a financial restructuring.

No relief will be given to the debt-laden company with respect to the Insolvency and Bankruptcy Code (IBC), the court said. Read Also: Gujarat HC issues stay on proceedings against Essar "The company was aware of the SBI's action". You can not play games with the court. 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. "This court is being misled", the RBI lawyer said.

The RBI's directive followed amendments to the Banking Regulation Act, which permitted the regulator to intervene directly in the resolution of almost Rs 10 lakh crore in stressed assets on the books of Indian banks.

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