The Gujarat High Court today refused to grant any relief to Essar Steel for the insolvency proceedings initiated against it at the Ahmedabad Bench of NCLT.
On July 14, the High Court had reserved its order to Monday on Essar Steel's plea against the June 13 RBI circular to banks to act under Insolvency and Bankruptcy Code against the steel major and 11 other firms with over Rs 5,000 crore of outstanding loans each.
Justice S.G. Shah passed an oral order saying no relief will be granted to Essar. Standard Chartered Bank had also moved the NCLT against Esaar.
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Essar Steel's counsel Mihir Thakore had argued that the SBI and other lender banks under the Joint Lenders Forum may not have made a decision to approach the National Company Law Tribunal (NCLT) for insolvency proceedings had the RBI not issued such a circular. At the hearing on Monday, Essar Steel's counsel Mihir Thakore argued that the SBI and other lender banks under the Joint Lenders Forum may not have approached the NCLT for insolvency proceedings, had the RBI not issued the circular. Shares of most of the nine listed companies out of the 12 on the RBI's list are on a downtrend since then. At the time, lenders were already discussing a restructuring plan approved by the company's board, it said.
Essar had also argued that proceedings could result in the company's demise when it was "almost in the stage of revival" and working to resolve its debt problems, according to court documents.
"The company was aware of the SBI's action. This court is beingmisled", the RBI lawyer had said. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT.
RBI's criteria for selecting the dozen defaulters was that each of them owed at least ₹5,000 crore to banks and 60% of it had turned non-performing by 31 March 2016. While arguing before the court, the RBI counsel had informed the court that these 12 NPA accounts represent 25 per cent of the total NPA of Rs 7,50,000 crore, which forms 5 per cent of the country's GDP.
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