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The Gujarat High Court today dismissed Essar Steel plea against the RBI's directives to the banks to initiate insolvency proceedings against it, saying it is not proper for it to interfere in the matter.
A bench of Justice S G Shah refused to grant any relief to the steel major also saying that with the firm owning a whopping debt of Rs 45,000 crore, the leders should be allowed to have their discretion to take legal steps to recover the amount.
"It is clear that when total debt is more than Rs 45,000 crore, there is no option but to leave the issue at the discretion of the lenders to take appropriate steps as per the law, thereby, without interference of this court under the constitutional mandate," the bench said in its order.
"Refusal of interim relief is obvious because petitioner company is in debt of more than Rs 45,000 crore for couple of years, its NPA was more than Rs 32,000 crore last year and more than Rs 31,000 crore the previous year," the bench said.
The court refused to grant any relief to the steel major against proceedings initiated against it by the State Bank of India and Standard Chartered Bank at National Company Law Tribunal (NCLT) under the IBC, indicating that all issues raised by the company should be considered by the NCLT.
"All issues (raised by the company) should be raised before NCLT, which has to ascertain that whether there is any reason to admit the insolvency resolution process immediately or not," the bench said.
While junking Essar Steel plea against RBI's insolvency order, the bench also ticked off the RBI for extending advice to NCLT to deal with the insolvency proceedings expeditiously.
The RBI had stated in its press release dated June 13, 2017 that Insolvency and Bankruptcy Code (IBC) proceedings against companies with outstanding dues of more than Rs 5,000 crore "will be accorded priority by NCLT."
For this, Justice Shah came down heavily on the RBI saying that it "should not give any advise, guidelines or directions to judicial or quasi-judicial authorities in any manner what so ever."
The RBI 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 the total NPAs of banks.
In a statement issued after the high court verdict on his plea, Essar Steel said it respects the court's order.
"We respect the decision of the honourable high court and will accordingly be raising these issues for consideration by the honourable NCLT," it said.
Essar Steel had moved the high court seeking the court's direction to quash and set aside RBI's direction to the banks to initiate insolvency proceedings against the company through a release dated June 13.
It had also sought setting aside the decision of Standard Chartered to initiate similar proceedings, and directing NCLT from going ahead with proceedings under IBC.
In its petition, the company had said it is a "victim of systemic delay in restructuring," and that it should be given time to complete its debt restructuring as it is "in advanced stage of discussions with the lenders on its debt resolution proposal."
It also added that it and has paid its lenders Rs 3,467 crore as interest between April 2016 and July 2017.
It had told the court that it was performing at 80 per cent capacity utilisation and was earning cash profits from which it was paying the banks interest, and had paid Rs 3,446 crore interest to its lenders.
It said several factors, including external factors, caused its debt to go up.
RBI counsel Darius Khambata argued that the steel conglomerate has suppressed facts and misled the court in order to get a favourable decision.
RBI counsel argued that though Essar Steel at one point "even agreed to go to NCLT," the company did not mention it in the petition, as had it been mentioned, the case would have been disposed off immediately.
The apex bank had told the court that Essar Steel was not singled out as all big defaulters -- having over Rs 5,000 crore of outstanding loans -- are being taken through the same route with an aim to resolve the bad loan problem plaguing the Indian banking system.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)