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..Essar Steel had moved the high court against Reserve Bank of India (RBI) for initiating insolvency procedure against it..Justice S.G. Shah today passed an oral order saying no relief will be granted to Essar. A detailed order is expected later today..Essar Steel’s creditors may now proceed with the insolvency proceedings at the NCLT, provided that this decision isn’t appealed against before a Division Bench of the High Court..As a backdrop, on 13 June 2017, the RBI had issued a press release directing banks to initiate insolvency against 12 non-performing accounts whose collective exposure accounted for 25% of the country’s bad loans. While doing so, the RBI (advertently or inadvertently) added a sentence in the press release which transgressed the very line that is drawn between the executive and judiciary,.“….Such cases will be accorded priority by the National Company Law Tribunal (NCLT)”.One of these 12 accounts was that of Essar Steel. Essar Steel challenged RBI’s decision on the following two broad grounds:.That RBI did not have any authority to direct the NCLT to fast-track certain cases and;That RBI’s decision in picking these 12 accounts was arbitrary inasmuch as no opportunity of being heard was provided to these companies that were being referred to..It wasn’t very thoughtful of the RBI to have directed NCLT to accord priority to certain cases. 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..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..Another point made by Essar Steel was that the press release issued by the RBI accounts for the financial position of the companies only until 31 March, 2016. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT. At the time, lenders were already discussing a restructuring plan approved by the company’s board, it said..Essar Steel claimed that it’s financial health had improved during the financial year 2016-17 and it no longer required to be a part of the 11 other NPAs as declared by the RBI and that it deserved to be a part of the other 488 cases that have been provided given six months to restructure..During the course of the proceedings, the Gujarat HC also asked the RBI to present documents to substantiate the the basis of declaring those particular 12 accounts for being referred to the NCLT..RBI said in its submission to the court that the 13 June press statement was based on the recommendation of a high-level internal committee and that the central bank had no documentary evidence to produce other than the press release itself to support the decision..Essar Steel has appointed Nanavati Associates, one of the top law firms of Gujarat, along with a battery of senior lawyers such as Mihir Thakore, Saurabh Soparkar, Mihir Joshi and advocates Keyur Gandhi and Raheel Patel to argue the case.RBI, which is the main respondent in the case, engaged renowned lawyer from Mumbai Darius Khambata, former additional solicitor general of India and Maharashtra advocate general. In addition, the apex bank has also appointed advocates Amar Bhatt and Rajendra Barot..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., in addition to Ravi Kadam, who was the advocate general of Maharashtra under three different chief ministers, senior lawyer Anshin Desai and few other senior advocates. Gujarat’s Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.
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..Essar Steel had moved the high court against Reserve Bank of India (RBI) for initiating insolvency procedure against it..Justice S.G. Shah today passed an oral order saying no relief will be granted to Essar. A detailed order is expected later today..Essar Steel’s creditors may now proceed with the insolvency proceedings at the NCLT, provided that this decision isn’t appealed against before a Division Bench of the High Court..As a backdrop, on 13 June 2017, the RBI had issued a press release directing banks to initiate insolvency against 12 non-performing accounts whose collective exposure accounted for 25% of the country’s bad loans. While doing so, the RBI (advertently or inadvertently) added a sentence in the press release which transgressed the very line that is drawn between the executive and judiciary,.“….Such cases will be accorded priority by the National Company Law Tribunal (NCLT)”.One of these 12 accounts was that of Essar Steel. Essar Steel challenged RBI’s decision on the following two broad grounds:.That RBI did not have any authority to direct the NCLT to fast-track certain cases and;That RBI’s decision in picking these 12 accounts was arbitrary inasmuch as no opportunity of being heard was provided to these companies that were being referred to..It wasn’t very thoughtful of the RBI to have directed NCLT to accord priority to certain cases. 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..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..Another point made by Essar Steel was that the press release issued by the RBI accounts for the financial position of the companies only until 31 March, 2016. Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT. At the time, lenders were already discussing a restructuring plan approved by the company’s board, it said..Essar Steel claimed that it’s financial health had improved during the financial year 2016-17 and it no longer required to be a part of the 11 other NPAs as declared by the RBI and that it deserved to be a part of the other 488 cases that have been provided given six months to restructure..During the course of the proceedings, the Gujarat HC also asked the RBI to present documents to substantiate the the basis of declaring those particular 12 accounts for being referred to the NCLT..RBI said in its submission to the court that the 13 June press statement was based on the recommendation of a high-level internal committee and that the central bank had no documentary evidence to produce other than the press release itself to support the decision..Essar Steel has appointed Nanavati Associates, one of the top law firms of Gujarat, along with a battery of senior lawyers such as Mihir Thakore, Saurabh Soparkar, Mihir Joshi and advocates Keyur Gandhi and Raheel Patel to argue the case.RBI, which is the main respondent in the case, engaged renowned lawyer from Mumbai Darius Khambata, former additional solicitor general of India and Maharashtra advocate general. In addition, the apex bank has also appointed advocates Amar Bhatt and Rajendra Barot..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., in addition to Ravi Kadam, who was the advocate general of Maharashtra under three different chief ministers, senior lawyer Anshin Desai and few other senior advocates. Gujarat’s Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.
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