The Gujarat High Court on Monday dismissed Essar Steel's writ petition challenging the RBI directive to a consortium of banks led by the SBI to initiate insolvency proceedings against the company for its high non-performing assets.
Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016.
In a major win for the Centre and its war on corporate bad loans, the Gujarat HC has rejected Essar Steel's plea against the RBI. Essar Steel's counsel Mihir Thakore had argued that the SBI and other lender banks under the Joint Lenders Forum may not have made a decision to approach the National Company Law Tribunal (NCLT) for insolvency proceedings had the RBI not issued such a circular.
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.
It wanted to be treated under the second category mentioned in the RBI's June 13 circular where NPA accounts under Rs 5,000 crore are to be given six months to finalise loan restructuring plans, the company said. Gujarat's Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.
No relief will be given to the debt-laden company with respect to the Insolvency and Bankruptcy Code (IBC), the court said.
RBI counsel Darius Khambata, however, said the steel firm had suppressed facts and misled the court to get a favourable decision. Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd.
The company has a debt of almost Rs 42,000 crore.
The RBI's directive followed amendments to the Banking Regulation Act, which permitted the regulator to intervene directly in the resolution of almost Rs 10 lakh crore in stressed assets on the books of Indian banks. While arguing before the court, the RBI counsel had informed the court that these 12 NPA accounts represent 25 per cent of the total NPA of Rs 7,50,000 crore, which forms 5 per cent of the country's GDP.