The Gujarat High Court on Monday dismissed Essar Steel’s petition that had challenged the Reserve Bank of India’s (RBI) directive to banks for initiating insolvency proceedings against the company.
Justice S.G. Shah passed an oral order saying no relief will be granted to Essar. A detailed order is expected later on Monday.
This sets the stage for Essar’s creditors such as State Bank of India (SBI) and Standard Chartered Bank to proceed against the company in the National Company Law Tribunal under the Insolvency and Bankruptcy Code (IBC), provided Essar does not challenge the court decision in the Supreme Court.
The Judge also said he has asked RBI to be more careful without giving out any details.
Essar Steel in its petition to the court has challenged a 13 June directive of RBI, in the form of a press release, in which the Central bank directed banks to refer a dozen cases, including Essar Steel, directly to NCLT. Essar contested a line in the RBI release which said NCLT will accord priority to these cases. It also objected to being clubbed with 11 other defaulters and said it was in discussion with banks to restructure repayments.
The Central Bank, after receiving sweeping powers to resolve bad loans through an amendment to the Banking Regulation Act, issued the 13 June circular on the criterion that the total banking exposure of the company should be at least Rs5,000 crore and 60% of this exposure should have turned non-performing as of March 2016.
Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016.
(Story published in arrangement with Livemint)