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Gujarat HC stays insolvency proceedings against Essar Steel

Directs RBI to explain how the 12 insolvency cases were accorded priority

Vinay Umarji  |  Ahmedabad 

RBI on June 13, 2017 came out with a press release asking banks to initiate insolvency proceedings at the NCLT benches against NPAs cases

The High Court has stayed the proceedings filed against the by its at the (NCLT)'s Ahmedabad bench till the next hearing on July 7. The high court also directed the of India (RBI) to explain what it meant by according priority to the 12 cases of by the

The High Court observed that the petitioner company had paid almost Rs 3,467 crore in last one year and that the company was doing well since 2016 and would be revived in view of serious effort of its revival by the company.
The had on June 13, 2017 came out with a asking to initiate proceedings at the benches against specific cases of which included steel players like and Bhushan Steel, among others.  

Among these, even as proceedings against were admitted by NCLT's bench, had filed a special civil application in to seek stay on such proceedings. 

On behalf of the petitioner Essar Steel, senior counsel Mihir Thakore and Mihir Joshi had argued that the company had been trying to restructure the package by the Board of Directors. However, before any concrete decision could be arrived at between the parties, the came as a sudden development.

While hearing the petition, Justice S G Shah found "one line quite shocking" which read 'such cases will be accorded priority by the NCLT', the judge observed. The further observed that while had classified few whose accounts were disclosed as NPAs, for taking action against them the effective date was considered as March 31, 2016 even though the was issued on June 13, 2017. 

In the wake of a back dated notification, apprehended in its petition that if action is taken according to the dated June 13, 2017, then considering the provisions of Section 7, 16 and 17 of the and Bankruptcy Code (IBC), 2016, the administration of the company would go into hands of Interim Professional. 

It needs to be mentioned here that once a financial creditor files application under Section 7 of the which is admitted by the NCLT, a suspension period of 180 days commences. During this period, the board of the company is replaced with a professional. The professional discharges the functions of the board till the time process is completed.

argued that an admission of proceedings would mean the company is closing at a time when it was almost in the stage of revival and was in the position to pay Rs 3,467 crore to the last year.

"In view of such fact, petitioner has come forward with a request to stay the proceedings. However, initially it would be appropriate to call upon the respondents to initially explain that what they mean by “Such cases will be accorded priority by the (NCLT).”, irrespective of filing detailed reply on returnable date. It would be appropriate for the to adjourn the matter, if any, listed before it before such date," the high court observed while calling for the next hearing on July 7.

First Published: Wed, July 05 2017. 14:51 IST