Essar Steel on Monday sought dismissal of an application for insolvency proceedings filed against it by lead creditor State Bank
of India (SBI) on "technical grounds" at the National Company Law Tribunal
(NCLT), Ahmedabad bench.
The ongoing hearing of insolvency proceedings against Essar Steel initiated by SBI
and Standard Chartered Bank
(SCB) at the NCLT bench was put off for Tuesday, July 25, 2017.
Essar Steel contended that the signatory of the application filed at NCLT did not have any authorisation of such powers by SBI
Chairman or Central Board, in this case, Chairperson Arundhati Bhattacharya.
Essar Steel counsel argued that under section 27 of the State Bank
of India (SBI) Act 1955, the Chairman exercises all powers and does acts exercised or done by SBI
subject to general or special directions given by the Central Board.
"The signatory of the application does not carry any such authorisation as required under section 27. Hence, the application by SBI
at NCLT is incomplete and not maintainable till the signatory is authorised," the Essar Steel counsel told the NCLT bench chaired by Justice Bikki Raveendra Babu. Led by advocate Mihir Thakore, the Essar Steel counsel, however, maintained that the application would become admissible once the signatory is authorised within seven days.
Essar Steel counsel also argued that the appointment of an interim resolution professional (IRP) should be done separately and not simultaneously with the admission of the insolvency proceedings against it.
"A separate hearing has to be given for appointment of the IRP, within 14 days of admission of application for insolvency proceedings," the counsel contended while invoking section 16 (1) (1) of Insolvency and Bankruptcy Code (IBC) 2016 which states that the adjudicating authority "shall appoint an interim resolution professional within 14 days from the insolvency commencement date".
With the division of the admission of lenders' applications and appointment of IRP into two separate stages, Essar Steel could avail enough time to challenge the process at the National Company Law Appellate Tribunal (NCLAT).
SCB and SBI
had independently filed applications for initiating insolvency proceedings against Essar Steel at NCLT's Ahmedabad bench for outstanding dues of over Rs 34000 crore emerging out of its steel plants in Gujarat. Earlier, Essar Steel had challenged these proceedings in the Gujarat High Court which dismissed the company's petition, thereby paving the way for initiating the process at NCLT.
If admitted by the Ahmedabad bench of NCLT on July 24, it would result in an immediate dissolution of Essar Steel's Board of Directors on the appointment of an interim resolution professional (IRP).
While SBI, in its application before the NCLT, has suggested Satish Kumar Gupta of Alvarez and Marsal India as the IRP to be appointed in case of Essar Steel, SCB has suggested Dinkar Tiruvannadapuram Venkatasubramanian of EY.
In its arguments, SBI
told the NCLT bench that, in the June 22 Joint Lenders' Forum (JLF) meeting, Essar Steel had agreed upon insolvency proceedings being initiated at NCLT even as the company now challenged SBI's application at the Ahmedabad bench.
The nationalised bank
also argued that since the SBI-led 22 banks' consortium represented 93 per cent of the total Rs 14860 crore debt owed by Essar Steel, the IRP suggested by the lead creditor should be appointed by the NCLT's Ahmedabad bench.
The professional gets 180 days to come up with a workable solution for the company so that it can repay its loans. This timeline can be extended by another 90 days. If the company failed to come up with a solution within the 270 days, a liquidator would be appointed.
The solution plan will have to be approved by the committee of creditors by a 75 per cent majority which is then filed with the NCLT.