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Insolvency case: Gujarat HC dismisses Essar Steel petition challenging RBI
17 July 2017, 03:57 | Kelvin Horton
Gujarat High Court dismisses Essar Steel's plea against RBI; insolvency process to continue
The Gujarat High Court on Monday disposed of the petition moved by Essar Steel challenging the insolvency proceeding against it by Reserve Bank of India without granting any relief to the company.
Essar Steel, in its petition, had appealed that the RBI notification arrived even while the firm was trying to implement a board-approved restructuring package.
Essar Steel had argued that it should have been given an opportunity to present its case before the Reserve Bank of India made a decision to include the company among 12 defaulters that would be referred to bankruptcy court.
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. It also objected to being clubbed with 11 other defaulters and said it was in discussion with banks to restructure repayments, financial daily Economic Times (ET) reported on Monday.
The steel company's debt has increased to over Rs 42,000 crore. Shares of most of the nine listed companies out of the 12 on the RBI's list are on a downtrend since then.
State Bank of India, which leads a consortium of banks under the Joint Lenders' Forum for corporate debt restructuring of Essar Steel and is a respondent in the case, has hired Shardul Amarchand Mangaldas and Co.
The action was a violation of his client's fundamental right to equality before the law and equal protection of the law under Article 14 of Constitution, he said.
RBI counsel Darius Khambata, however, said the steel firm had suppressed facts and misled the court to get a favourable decision.
"The company was aware of the SBI's action". Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd. You can not play games with the court. Instantly acknowledging this error, the RBI told the Gujarat High Court that it would withdraw this line from the press release, and did so by the means of a corrigendum. Some other estimates put them at Rs 8-10 lakh crore that includes bad loans of some private banks. 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.