Published: Mon, July 17, 2017
Markets | By Noel Gibbs

HC denies any relief to Essar Steel in insolvency case

HC denies any relief to Essar Steel in insolvency case

Essar Steel had moved the high court against Reserve Bank of India (RBI) for initiating insolvency procedure against it.

Essar Steel had a debt of Rs 45,655 crore, of which Rs 31,671 crore had turned non-performing assets for banks by March 31, 2016.

The Gujarat High Court's order clears the way for no further challenges by any of the companies going to insolvency courts on the grounds made by Essar Steel. It may be noted that Gujarat HC had stayed an insolvency proceedings against Essar Steel as the company had argued before the court that it was in advanced stage of restructuring its debt. He had said the company was challenging RBI's directive, not SBI's decision, as the state bank was mandated by the central bank to file a case with NCLT against the firm by issuing that circular.

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RBI counsel Darius Khambata, however, said the steel firm had suppressed facts and misled the court to get a favourable decision. 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. "The company was aware about SBI's action". RBI counsel argued that though Essar Steel at one point "even agreed to go to NCLT", the company did not mention it in the petition, as had it been mentioned, the case would have been disposed of immediately.

Following the RBI direction, a joint lenders' forum led by State Bank of India (SBI) and initiated proceedings in the NCLT under the newly-formed IBC.

Pronouncing the verdict on Monday, Justice S G Shah declined any relief to Essar Steel. You can not play games with the court.

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Earlier May, the government notified an ordinance for speedy resolutions of NPAs in efforts to deal with the problem of India's chronic bad loans, which have surged to to Rs 9.63 lakh crore.

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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