Gujarat HC turns down Essar Steel plea against RBI’s insolvency proceedings

ESSAR IPO/LONDON

The Gujarat High Court on Monday disposed of Essar Steel’s petition against insolvency proceedings initiated by its lenders after a directive by the Reserve Bank of India (RBI).

This is likely to smoothen the insolvency proceedings against Essar as well as the 11 other non-performing accounts identified by the RBI. The four other steel companies on the list, however, have already said they would cooperate with lenders and not move court to stall proceedings.

On July 4, Essar Steel, promoted by the Ruias, had filed a petition against the insolvency proceedings initiated against it at the National Company Law Tribunal (NCLT). Commenting on the court’s observations that the NCLT will have to decide on its own whether the insolvency petition is required to be entertained or not, Essar Steel stated in an official communiqué, “We respect the decision… (of the court) and will accordingly be raising these issues for consideration by the NCLT.”

The Ahmedabad bench of the NCLT is likely to take up insolvency proceedings against Essar Steel, initiated by a consortium of 22 banks led by the State Bank of India as well as Standard Chartered Bank, on Tuesday.

The court asked the RBI to see to it that benefits of all its schemes were “equally offered and extended to all without discrimination”.

On July 8, the central bank had to issue a corrigendum, deleting a line in its June 13 press release that said certain cases be accorded priority by the NCLT.

The court also raised questions over the RBI’s functioning and jurisdiction.

The central bank has already admitted that there were no supporting documents to its June 13 press release directing the lenders and the NCLT to accord priority to 12 large non-performing assets (NPAs).

The Gujarat HC said the RBI seemed to be under the impression that matters pertaining to the Company Law had been transferred to the NCLT by enacting the Insolvency and the Bankruptcy Code. However, no judicial or quasi-judicial authority could be guided or directed by government institutions like the RBI. Read More

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