agencies
Mumbai: The Gujarat High Court Monday dismissed Essar Steel India Ltd’s appeal against a Reserve Bank of India (RBI) order that asked creditor banks to start insolvency proceedings against the steelmaker, lawyers on the case said.
With the latest order, the interim stay granted on the proceedings against Essar Steel under the NCLT stands vacated and insolvency proceedings can be resumed by the lenders led by State Bank of India (SBI).
The ruling is a boost to the government, which in May tweaked Indian banking laws to empower the RBI to tackle the country’s bad debt issue, allowing the RBI for the first time to direct lenders to force defaulters into insolvency courts.
The ruling paves the way for the start of bankruptcy proceedings against Essar Steel, although the company could appeal the ruling. The company did not immediately respond to a Reuters request for comment.
Essar Steel had argued that it should have been given an opportunity to present its case before the Reserve Bank of India decided to include the company among 12 defaulters that would be referred to bankruptcy court.
Essar had also argued that proceedings could result in the company’s demise when it was “almost in the stage of revival” and working to resolve its debt problems, according to court documents.
The case was seen as a landmark case under the newly introduced Insolvency and Bankruptcy Code (IBC), while the judgment is seen as a big boost for the banks, which are standing on the huge pile of corporate non-performing assets (NPAs), which according to the Reserve Bank stood at Rs 7,50,000 crore as on March 31, 2017.
Time for debt restructuring sought
Essar Steel has issued a statement after Gujarat High Court dismissed the company’s relief requests Monday.
“Our request to the Hon’ble High Court was that in view of the specific facts of Essar Steel, i.e., advanced stage of discussions with lenders on its debt resolution proposal, payment of Rs3467 crores to banks between April 2016 and June 2017, and the substantial improvement in all operating parameters, the Company should have been given time to complete its debt restructuring as we apprehended that referring the company to the IBC at this stage may result in deterioration of the Company’s operations and in fact, may delay the resolution discussion with the Banks,” the statement read.
“We respect the decision of the Hon’ble High Court and will accordingly be raising issues for consideration by the Hon’ble NCLT.”
Essar Steel owes lenders around 450 billion rupees of which 316.7 billion rupees had become non-performing as of March 31, 2016, a media report previously reported. PTI
