Gujarat High Court has dismissed the petition filed against Reserve Bank of India by Essar Steel.
More companies expected to follow Essar Steel's footsteps; what does this mean for loan resolution?
Essar Steel owes lenders around Rs 45,000 crore.
Essar Steel had argued that it should have been given an opportunity to present its case before the Reserve Bank of India chose to include the company among 12 defaulters that would be referred to bankruptcy court.
Essar Steel is amongst the 12 stressed companies that RBI has shortlisted for insolvency proceedings. Essar's petition stirred a controversy over the RBI's press release which mentioned that such cases would be accorded priority for resolution.
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The company was challenging the RBI's directive, not the SBI's decision. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT.
It should not be treated on par with the other 11 accounts because these accounts are now closed while Essar Steel is doing well with annual turnover of Rs 20,000 crore, the company said.
Essar Steel had moved court against the June 13 RBI circular contending that RBI's decision to select the steel producer among the 12 NPA accounts as arbitrary while the firm was in an advanced stage of loan restructuring. The RBI had identified top 12 NPA accounts, of which Essar Steel was one of them.
Following the RBI direction, a joint lenders' forum led by State Bank of India (SBI) and initiated proceedings in the NCLT under the newly-formed IBC. The ordinance gave powers to the RBI to direct banks to initiate bankruptcy proceedings against bad debt accounts under the Insolvency and Bankruptcy Code 2016 (IBC). "This court is beingmisled", the RBI lawyer had said.
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. Standard Chartered Bank had also moved the NCLT against Esaar.