The Ahmedabad bench of the National Company Law Tribunal (NCLT) admitted an insolvency petition against Essar Steel India Ltd (ESIL) on Wednesday, paving the way for insolvency proceedings to commence against a big-ticket defaulter under the newly enacted Insolvency and Bankruptcy Code (IBC), 2016.
The decision comes as a major setback for ESIL, led by the Ruias, which has had a total debt of ₹45,000 crore on its books for a couple of years now. For lenders, non-performing (NPAs) under ESIL assets crossed ₹32,000 crore in 2016-17 and were at over ₹31,000 crore in 2015-16.
The NCLT bench, chaired by Justice Bikki Raveendra Babu, was hearing a petition by lenders, who were represented by State Bank of India and global lender Standard Chartered Bank.
The two banks had independently filed applications to initiate insolvency proceedings against ESIL at the NCLT’s Ahmedabad bench, to recover the NPAs.
Justice Babu rejected Essar Steel’s plea to dismiss the insolvency proceedings and ordered the appointment of the SBI-nominated Satish Kumar Gupta from Alvarez & Marsal India as the Interim Resolution Professional (IRP), as required by the Code.
However, StanChart’s counsel had sought the appointment of Ernst & Young partner Dinkar Venkatasubramanian as the IRP.
180-day deadline The Interim Resolution Professional will get 180 days to come out with a resolution for the company to repay the loan, under the terms of the code. The plan has to be approved by the committee of lenders by a 75 per cent majority before being filed with the NCLT.
The maximum permitted time is 270 days for such a plan to get approved, failing which a liquidator will be appointed to initiate the liquidation.
Among the lenders, the SBI-led consortium of lenders has a 93 per cent share of the total ₹45,000 crore outstanding with ESIL. Also, ESIL had defaulted on its guarantee, worth ₹3,700 crore, to StanChart for one of its subsidiaries in Mauritius, Essar Steel Offshore Ltd.