Insolvency proceeding: Gujarat High Court dismisses Essar Steel plea against RBI directive

Gujarat High Court dismisses Essar Steel's plea challenging RBI order on bankruptcy

Gujarat High Court dismisses Essar Steel's plea challenging RBI order on bankruptcy

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.

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).

Earlier this year, the RBI had identified top 12 NPA accounts, including of Essar Steel, for bankruptcy proceedings.

As per the latest development, the High Court dismissed the plea by Essar Steel against bankruptcy proceedings initiated by its lenders at the National Company Law Tribunal (NCLT).

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.

The RBI later issued a corrigendum to the press release and deleted the statement. Standard Chartered Bank had also moved the NCLT against Esaar.

The company claimed that unilateral action was being initiated when it was in a restructuring mode and objected that it was being clubbed with the other 11 major defaulting firms.

The company was challenging the RBI's directive, not the SBI's decision.

The RBI's counsel disputed both points stating that it was not true that the company was discussing restructuring of repayments with banks, while insolvency proceedings would in fact help the company to shape up and not close it down.

The action was a violation of his client's fundamental right to equality before the law and equal protection of the law under Article 14 of Constitution, he said. "This court is being misled", he had said during the arguments. "The company was aware about SBI's action". This goes up to Rs 10 lakh crore when those of private and other lenders are added on. Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd.

RBI's criteria for selecting the dozen defaulters was that each of them owed at least ₹5,000 crore to banks and 60% of it had turned non-performing by 31 March 2016.

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