Essar Steel on Tuesday sought time from the National Company Law Tribunal (NCLT) to file its objections regarding the insolvency proceedings initiated by its lenders — State Bank of India (SBI) and Standard Chartered Bank. This follows the dismissal of its petition by the Gujarat High Court on Monday.
A single-judge bench at the Ahmedabad NCLT of Justice Bikki Raveendra Babu has scheduled the case for July 24. The court has, meanwhile, directed Essar Steel to file its submission by July 22. Essar Steel owes lenders around Rs 45,000 crore, of which Rs 31,671 crore has become non-performing as on March 2016.
Essar Steel lawyers sought time from NCLT saying their petition in the High Court was against the RBI and it needs some more time to file its reply in the insolvency case.
SBI and Standard Chartered Bank referred Essar Steel to NCLT in June to initiate insolvency proceedings following a June 13 circular by the central bank, directing banks to initiate insolvency proceedings against 12 companies.
On July 4, Essar Steel had moved the Gujarat High Court challenging RBI’s directive and managed to get a temporary stay on NCLT proceedings. However, the court’s recent dismissal of Essar Steel’s petition paved the way for the company’s lenders to continue their proceedings before NCLT where the matter was listed for hearing.
On their part, SBI and Standard Chartered Bank lawyers told NCLT that the company has already got enough time to file its reply and added that insolvency proceedings should not be delayed.
Essar Steel’s Mauritius-based subsidiary had borrowed about Rs 3,400 crore from Standard Chartered Bank for which Essar Steel’s promoters were guarantors. The company defaulted in its payment and its proposal to repay the amount in 25 years’ time at 1% interest to the bank was not acceptable, Standard Chartered Bank’s counsel Kamal Trivedi told NCLT.
Once cases are admitted, lenders need to set up a committee of creditors that will come up with a plan on how the asset will be tackled. If the committee is unable to find a solution within 180 days — this can be extended to 270 days — the borrowing entity will go into liquidation.