Published: Mon, July 17, 2017
Sci-tech | By Carrie Guzman

HC denies any relief to Essar Steel in insolvency case

HC denies any relief to Essar Steel in insolvency case

PSU bank stocks turned green in the closing hours of trade on Monday after the Gujarat High Court (HC) dismissed Essar Steel's plea against RBI.

The RBI counsel said Essar Steel's representative was present at a joint lenders' forum meeting.

Essar Steel owes lenders around Rs45,000 crore ($6.99 billion), of which Rs31,670 crore had become non-performing as of 31 March 2016. The RBI had identified top 12 NPA accounts, of which Essar Steel was one of them.

Gujarat HC dismisses Essar Steel's plea against RBI
Bad loans: Gujarat HC dismisses petition by Essar Steel seeking relief from insolvency proceedings

Recovery of bad loans, a millstone around the neck of Indian banks, had gathered momentum after years of dithering when the Prime Minister Narendra Modi-led NDA government empowered the Reserve Bank of India (RBI) last month to direct banks to take big defaulters through the process prescribed under the Insolvency and Bankruptcy Code that specifies time-bound resolution. Essar's petition stirred a controversy over the RBI's press release which mentioned that such cases would be accorded priority for resolution. It was then argued "the initiation of proceedings under the Bankruptcy Code results in coercive steps including mandatory suspension of the functioning of the Board of Directors and hands over of management to Insolvency Resolution Professional (IRP)". However, Essar continued to object to being clubbed with other 11 NPA accounts, whereas it was in discussion with banks for a financial restructuring. Essar even invoked Article 14 (equality before the law) and alleged the central bank had chosen it for IBC proceedings exclusively on the basis of its outstanding loan being greater than Rs. 5000 Crores with 60% or more classified as NPAs by banks as of March 31, 2016.

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. "This court is beingmisled", the RBI lawyer had said. In addition, the apex bank has also appointed advocates Amar Bhatt and Rajendra Barot. Also, has the Essar case being prolonged, this would have prompted other firms to approach courts across the country to try and delay the NCLT process.

Essar has filed a petition in the Gujarat High Court challenging the "arbitrariness" of the central bank.

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