Gujarat HC rejects Essar Steel plea against RBI's insolvency circular

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What could be a big boost for the government's drive against corporate bad loans, the Gujarat High Court today dismissed a plea by Essar Steel against the Reserve Bank of India (RBI).

Essar Steel is amongst the 12 stressed companies that RBI has shortlisted for insolvency proceedings. A bench of Justice S G Shah pronounced its verdict on the Essar Steel plea and refusing to accede to it, said its petition stands disposed of.

Reserve Bank of India (RBI) had picked up 12 companies for the immediate resolution of Non-performing asset (NPAs) under the Insolvency and Bankruptcy Code (IBC). Shares of most of the nine listed companies out of the 12 on the RBI's list are on a downtrend since then. The RBI later issued a corrigendum to the press release and deleted the statement. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT. However, Essar continued to raise objection on being clubbed with other 11 NPA accounts, whereas it was in discussion with banks for a financial restructuring.

An RBI circular last month asked the banks to initiate action against Essar Steel and eleven other firms with over Rs 5,000 crore of outstanding loans each under the IBC. Standard Chartered Bank had also moved the NCLT against Esaar. Read Also: Gujarat HC issues stay on proceedings against Essar "The company was aware of the SBI's action". The central bank has already directed the lead banker IDBI Bank to initiate insolvency proceedings on Lanco Infratech, which has about Rs 18,000 crore in unpaid dues. The steel company's debt has increased to over Rs 42,000 crores. You can not play games with the court.

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RBI counsel Darius Khambata, however, said the steel firm had suppressed facts and misled the court to get a favourable decision.

The RBI's directive followed amendments to the Banking Regulation Act, which permitted the regulator to intervene directly in the resolution of almost Rs 10 lakh crore in stressed assets on the books of Indian banks.

Earlier this year, the RBI had identified top 12 NPA accounts, including of Essar Steel, for bankruptcy proceedings.

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