HC denies any relief to Essar Steel in insolvency case

HC denies any relief to Essar Steel in insolvency case

HC denies any relief to Essar Steel in insolvency case

On July 14, the court had reserved its order for Monday on Essar Steel's plea against July 13 RBI circular to banks to act under Insolvency and Bankruptcy Code against the steel major and 11 other firms with over Rs 5000 crore outstanding loans. Read Also: Action against Essar Steel based on internal panel's advice: RBI to Gujarat HC The RBI (Reserve Bank of India) had last month identified 12 accounts (companies) for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of total NPAs of banks.

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.

Essar Steel is amongst the 12 stressed companies that RBI has shortlisted for insolvency proceedings.

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. No relief will be given to the debt-laden company with respect to the Insolvency and Bankruptcy Code (IBC), the court said, according to TV news reports.

Justice SG Shah said Essar will be granted no relief, Mint reported. "The company was aware about SBI's action". Essar Steel has a total debt at Rs. 42,000 crore to these banks.

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Following the RBI direction, a joint lenders' forum led by State Bank of India (SBI) and initiated proceedings in the NCLT under the newly-formed IBC.

RBI counsel Darius Khambata, however, said the steel firm had suppressed facts and misled the court to get a favourable decision.

Another point made by Essar Steel was that the press release issued by the RBI accounts for the financial position of the companies only until 31 March, 2016. You can not play games with the court. Bad loans at state-run banks have increased by more than Rs 1 lakh crore since April 2016 to Rs 6 lakh crore as of December 31.

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.

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