The Gujarat High Court on Monday granted no relief to Ruias-led Essar Steel against the insolvency proceedings initiated against it by its lenders under the National Company Law Tribunal (NCLT).
An RBI circular last month asked the banks to initiate action against Essar Steel and eleven other firms with over Rs 5,000 crore of outstanding loans each under the IBC.
The Gujarat High Court's order clears the way for no further challenges by any of the companies going to insolvency courts on the grounds made by Essar Steel. The company had argued that it should not be treated at par with other 11 accounts, as while these accounts are now closed, Essar Steel is still doing well with an annual turnover of Rs 20,000 crore.
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.
The RBI's counsel disputed both points stating that it was not true that the company was discussing restructuring of repayments with banks, while insolvency proceedings would in fact help the company to shape up and not close it down. "The company was aware about SBI's action".
Pronouncing the verdict on Monday, Justice S G Shah declined any relief to Essar Steel, vacating the stay ordered by it for banks to initiate insolvency proceedings against it. Meanwhile, bankruptcy proceedings have also been filed on Essar Steel Ltd and Monnet Ispat and Energy Ltd.
Essar Steel has a total debt on books at Rs 42,000 crore.
In a major win for the Centre and its war on corporate bad loans, the Gujarat HC has rejected Essar Steel's plea against the RBI. You can not play games with the court. The apex bank had told the court that Essar Steel was not singled out as all big defaulters - having over Rs 5,000 crore of outstanding loans - are being taken through the same route with an aim to resolve the bad loan problem plaguing the Indian banking system.
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.