The Gujarat High Court on Friday adjourned the hearing on the Essar Steel Ltd’s petition challenging the insolvency proceedings filed by its lenders at the National Company Law Tribunal (NCLT) to July 12. This means that stay on NCLT proceedings will continue.

Meanwhile, the Reserve Bank of India (RBI) admitted an error in its June 13 press release, which asked NCLT to prioritise the top 12 non-performing accounts for the insolvency proceedings.

The counsel appearing for the RBI stated that a corrigendum will be issued on the said press release in the part of the fifth para, which had stated, “The Reserve Bank, based on the recommendations of the Internal Advisory Committee (IAC), will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT)."

The court had raised an objection to the line which says priority to be accorded to such NPA accounts having outstanding debt of over ₹5,000 crore and 60 per cent of that being termed as bad loans by the banks as on March 31, 2016.

In its earlier hearing of the case on July 4, the Gujarat High Court had sought a clarification from the RBI on the said statement.

The Court had stayed the insolvency proceedings filed against Essar Steel by its lenders at NCLT's Ahmedabad bench till the next hearing on July 7. On Friday, Essar Steel's counsel, represented by senior lawyer Mihir Thakore argued that as per Section 35 of the Banking Regulations Act, the lenders could not have initiated the insolvency proceedings at a time when the restructuring process was on.

Also, he underlined the fact that out of the 12 top NPA accounts, three were non-functioning and Essar Steel had improved its performance over the past one year and had repaid ₹3,467 crore to its lenders. Essar Steel's counsel further raised objection on putting Essar Steel in the same category along with the other 11 companies for insolvency proceedings on the basis of the RBI directive of ₹5,000 crore outstanding loans.

Further, the company had already agreed to the boundary conditions for the resolution plan with lenders and was only awaiting certain clarifications from the RBI to implement the plan.

Essar Steel submitted to the High Court that in the context of the RBI's June 13 press release, that it should be put in the category of NPA accounts, where banks are asked to finalise a resolution plan within six months, failing to which, banks should be required to file for insolvency proceedings under the IBC.

Essar Steel, which has a total debt on books at ₹42,000 crore, had registered a strong recovery in the operating profits over the past one year.

The company having turnover of ₹20,000 crore, owns 8 per cent of the country's total steel making capacity, while 80 per cent of installed capacity of Gujarat.

Related Topics
comment COMMENT NOW