Earlier this month, Essar Steel moved Gujarat High Court challenging bankruptcy proceedings initiated by Standard Chartered against it.
RBI counsel argued that though Essar Steel at one point "even agreed to go to NCLT", the company did not mention it in the petition, as had it been mentioned, the case would have been disposed of immediately.
On its part, the RBI contested in the court that it is not singling out Essar Steel for insolvency proceedings, and that all the big loan defaulters with outstanding loans above Rs 5,000 crore would be subject to the same.
On July 14, the High Court had reserved its order to Monday on Essar Steel's plea against the June 13 RBI circular to banks to act under Insolvency and Bankruptcy Code against the steel major and 11 other firms with over Rs 5,000 crore of outstanding loans each.
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.
Though the Insolvency and Bankruptcy Code is in force since December 2016, the lender banks did not opt for insolvency proceedings because they knew it would "jeopardise company's operations" as suppliers may stop supplying material on learning about such action, Thakore said. They will take a decision in a day or to as time is a critical factor in this.
"The company was aware of the SBI's action". Essar Steel argued that it was not given adequate opportunity to present its position before the insolvency case was filed at the NCLT. You can not play games with the court. "This court is being misled", he had said during the arguments.
Post this RBI identified the 12 accounts, constituting for 25 percent of total non-performing assets (NPAs) of banks. It also said that it has repaid nearly Rs 3,467 crore in last one year, adding that it employs 4,500 people and that if action was taken under the provisions of sections 7, 16 and 17 of the Insolvency and Bankruptcy Code (IBC), the administration of the company would go into hands of interim resolution professionals (IRP) and it would result in the closing down of the company.