Essar Steel has challenged the insolvency proceedings initiated against it by the Reserve Bank of India in the Gujarat High Court. A company official told Mint that the matter will be heard on July 7.
The steel major’s lenders had initiated insolvency proceedings against it at the National Company Law Tribunal on the RBI’s directions June 23. Essar Steel, which is unlisted on the stock exchange, had a debt of Rs 37,284 crore. On June 13, the RBI had identified 12 non-performing accounts, which account for about 25% of the country’s total bad loans, and said they must now undergo bankruptcy proceedings.
Essar Steel told the court that it had cleared Rs 3,467 crores of debt in 2016-17. They further argued that if the NCLT submitted the insolvency application, the administration of “an otherwise healing company” will go into the hands of an interim resolution professional. “Further, the cut-off date of March 31, 2016, itself is arbitrary as it does not take into account the subsequent developments in the companies’ performance,” a lawyer representing the company told The Hindu. Essar Steel has 4,500 employees on its rolls.
The firm also accused the RBI of making an “arbitrary distinction” between the 12 identified companies and the rest, reported Business Standard. While the apex bank had asked lenders to to refer the 12 cases directly to the NCLT, other stressed borrowers were given six months to achieve a resolution.