Ahmedabad, July 17 (IANS) The Gujarat High Court on Monday dismissed Essar Steel's writ petition challenging the Reserve Bank of India (RBI) directive to a consortium of banks to initiate insolvency proceedings against the company for its high non-performing assets.
Justice S.G. Shah issued an oral order stating that no relief could be granted to the steel major and the matter should be taken up with the National Company Law Tribunal (NCLT).
Essar had claimed that unilateral action was being initiated when it was in a restructuring mode and objected to being clubbed with 11 other firms.
In a statement, the company said that their plea before the court was that "it should have been given time to complete its debt restructuring as we apprehended that referring the company to the IBC (Insolvency and Bankruptcy Code) at this stage may result in deterioration of the company's operations and in fact, may delay the resolution discussion with the banks." It said it would now raise its plea before the NCLT.
Essar Steel, in its July 4 petition, challenged the Reserve Bank of India's (RBI) direction to a consortium let by the State Bank of India to refer cases of 12 companies, including Essar, to the NCLT and initiate insolvency proceedings. The central bank's June 13 directive was issued through a press release.
Essar Steel said it was in advanced stage of discussions with lenders on its debt resolution proposal and payment of Rs 3,467 crore had been made to banks between April 2016 and June 2017, and that there had been substantial improvement in all its operating parameters.
Essar Steel had a debt of Rs 45,655 crore, of which Rs 31,671 crore had turned non-performing assets for banks by March 31, 2016. This increased to Rs 32,864 crore by March 31 this year.
The RBI's counsel disputed the points raised by Essar stating that it was not true that the company was discussing restructuring of repayments with banks. The counsel said insolvency proceedings would help the company to shape up and not close it down.