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Gujarat HC turns down Essar Steel plea against RBI's insolvency proceedings

HC turns down Essar Steel plea on insolvency, raps central bank for 'overstepping jurisdiction'

Vinay Umarji & Abhijit Lele  |  Ahmedabad 

Gujarat HC rejects Essar Steel's plea against insolvency proceedings

The Gujarat High Court on Monday disposed of Essar Steel’s petition against proceedings initiated by its lenders after a directive by the Reserve Bank of India (RBI).

This is likely to smoothen the proceedings against Essar as well as the 11 other non-performing accounts identified by the The four other steel on the list, however, have already said they would cooperate with lenders and not move court to stall proceedings.

On July 4, Essar Steel, promoted by the Ruias, had filed a petition against the proceedings initiated against it at the National Tribunal (NCLT). Commenting on the court’s observations that the will have to decide on its own whether the petition is required to be entertained or not, stated in an official communiqué, “We respect the decision… (of the court) and will accordingly be raising these issues for consideration by the

The Ahmedabad bench of the is likely to take up proceedings against Essar Steel, initiated by a consortium of 22 banks led by the State Bank of India as well as Standard Chartered Bank, on Tuesday.

The court asked the to see to it that benefits of all its schemes were “equally offered and extended to all without discrimination”.

On July 8, the central bank had to issue a corrigendum, deleting a line in its June 13 press release that said certain cases be accorded priority by the  

The court also raised questions over the RBI’s functioning and jurisdiction. 

The central bank has already admitted that there were no supporting documents to its June 13 press release directing the lenders and the to accord priority to 12 large (NPAs).

The said the seemed to be under the impression that matters pertaining to the had been transferred to the by enacting the and the However, no judicial or quasi-judicial authority could be guided or directed by government institutions like the

A senior public sector banker dealing with cases said the verdict was not a surprise as facts were clear. Banks have been focussing on resolution plans for the cases.  Essar had earlier claimed the directive was “arbitrary” and impeded the recovery process amid discussions for debt restructuring with banks.

The court rejected the argument. According to the counsel, in its restructuring proposal had offered to start payment of dues only after 25 years and that too only with 1 per cent interest.  Earlier the RBI, the SBI and had claimed that had suppressed facts from the court about the company agreeing to proceedings against it as evident in the minutes of the Joint Lenders’ Forum (JLF) meeting held in June.  However, the court said the allegations were not material.According to the RBI’s arguments before the court earlier, Essar Steel’s account had an outstanding bank exposure of Rs 45,655 crore, Of this, Rs 31,671 crore had become non-performing by March 31, 2016. The same increased to Rs 32,864 crore by March 31 this year.

Sell-out road
 
The ruling might help speed the process for and other non-performing accounts: 

June 13: identifies 12 top for initiating proceedings by banks

June 27: proceedings at initiated against Essar Steel

July 4: moves Gujarat HC; asked to defer proceedings. Court also asks to explain what it means by “according priority”

July 5: Standard Chartered Bank, one of the lenders, appeals against the deferment of proceedings

July 7: admits corrigendum to June 13 circular

July 12: falsely claimed about completion of restructuring process, tells court

July 13: had agreed to proceedings, SBI tells court

July 17: disposes of Essar Steel’s petition

 

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