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Gujarat HC dismisses Essar Steel plea against RBI in bankruptcy case

Ruling a boost for govt, which has tweaked banking laws to empower RBI to tackle the bad debt issue

Reuters  |  Mumbai 

Gujarat HC's Essar Steel verdict on Monday

The High on Monday dismissed Ltd's appeal against a Reserve of (RBI) order that asked creditor banks to start insolvency proceedings against the steelmaker, lawyers on the case said.

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 proceedings against Steel, although the company could appeal the ruling. The company did not immediately respond to a Reuters request for comment.

had argued that it should have been given an opportunity to present its case before the Reserve of decided to include the company among 12 defaulters that would be referred to

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 documents.

The RBI had in June asked lenders to start insolvency proceedings against 12 companies, as part of new powers it gained this year to help the country cut down on the more than $150 billion in stressed assets in the banking system.

owes lenders around 450 billion rupees ($6.99 billion), of which 316.7 billion rupees had become non-performing as of March 31, 2016, Mint newspaper previously reported citing hearings.

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First Published: Mon, July 17 2017. 16:35 IST