The Gujarat High Court on Monday dismissed Essar Steel's writ petition challenging the RBI directive to a consortium of banks led by the SBI 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. The court's detailed order was expected later.
Essar Steel, in its July 4 petition, challenged the Reserve Bank of India's (RBI) direction to banks to refer cases of 12 companies, including Essar, with high NPAs directly to the National Company Law Tribunal (NCLT) and initiate insolvency proceedings.
The central bank's June 13 directive was issued through a press release.
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 company claimed that unilateral action was being initiated when it was in a restructuring mode and objected that it was being clubbed with the other 11 major defaulting firms. The steelmaker also alleged that it was being singled out.
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.
( 241 Words)