Gujarat High Court quashes Essar Steel's plea against bankruptcy proceedings

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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).

Today's high court decision might come as a relief to lenders, who got wary of the prospects of recovery from 12 biggest loan defaulters, as they feared the others may also move courts to stall bankruptcy proceedings and delay the retrieval after the interim relief to Essar Steel.

Essar Steel in its petition to the court has challenged a 13 June directive of RBI, in the form of a press release, in which the Central bank directed banks to refer a dozen cases, including Essar Steel, directly to NCLT. Essar's petition stirred a controversy over the RBI's press release which mentioned that such cases would be accorded priority for resolution. This goes up to Rs 10 lakh crore when those of private and other lenders are added on. Shares of most of the nine listed companies out of the 12 on the RBI's list are on a downtrend since then. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT. Gujarat's Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.

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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. It may be recalled that RBI had asked banks to treat bad loans as per the provisions available under the Insolvency and Bankruptcy Code. Read Also: Gujarat HC issues stay on proceedings against Essar "The company was aware of the SBI's action. This court is being misled", he had said during the arguments. You can not play games with the court.

Earlier this year, the RBI had identified top 12 NPA accounts, including of Essar Steel, for bankruptcy proceedings. "This court is beingmisled", the RBI lawyer had said.

"The stressed assets of Indian banks are likely to increase to 15 per cent of total loans by March 2018 amid rising requirements for regulatory capital until 2019", ET quoted S&P Global ratings as saying in a recent report.