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.
In its defence, the RBI had clarified that Essar Steel was not the only company singled out for insolvency proceedings. Essar Steel also said that whereas other companies had shut shop, Essar Steel was still functional with an annual turnover of Rs 20,000 crore. RBI had named a total of 12 firms including Essar Steel and had asked banks to initiate proceedings against these companies under the Insolvency and Bankruptcy Code.
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. Gujarat's Advocate General Kamal Trivedi appeared for Standard Chartered Bank; He was briefed by Singhi & Co.
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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 also objected to being clubbed with 11 other defaulters and said it was in discussion with banks to restructure repayments. "The company was aware about SBI's action". The central bank has already directed the lead banker IDBI Bank to initiate insolvency proceedings on Lanco Infratech, which has about Rs 18,000 crore in unpaid dues. You can not play games with the court.
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. "This court is beingmisled", the RBI lawyer had said.
Essar Steel is one of the dirty dozen - the 12 accounts with large unresolved NPAs (non performing assets) which the Reserve Bank of India has identified for speedy action on recovery of dues. 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.