The State Bank of India today told the Gujarat High Court that Essar Steel had “suppressed facts” while challenging the RBI’s directive to lender banks to initiate insolvency proceedings against the company. SBI counsel Ravi Kadam told the bench of S G Shah that Essar Steel had accepted a decision by the joint lenders forum (JLF) of the banks to approach the National Company Law Tribunal (NCLT) for insolvency proceedings against the firm.
The SBI is one of the respondents in the steel major’s plea to the high court. Kadam said the company knew through a June 15 letter from SBI that the JLF was planning to initiate insolvency proceedings, but it “suppressed the fact” by not revealing this before the court. Essar Steel had made suggestions to the JLF for appointment of a `resolution professional’ too, but its petition before the HC didn’t mention this, Kadam said.
Essar Steel’s argument that the proceedings were arbitrary was, therefore, baseless, argued Kadam adding that the HC should vacate its stay to the insolvency proceedings before the NCLT “here and now.”
The SBI also defended an RBI press release which had directed the lenders to initiate proceedings under the Insolvency & Bankruptcy Code (IBC) against twelve borrowers including Essar Steel, saying that Rs 5,000-crore cut-off is “recommendation of RBI’s internal advisory committee and not a directive.”
The top twelve borrowers including Essar Steel owe Rs 1.78 lakh crore to the lenders and the RBI’s recommendation was to recover the largest amount first, Kadam said. Essar Steel, however, submitted to the court that it was challenging the press release issued by the RBI, and not the JLF’s decision.
“SBI’s decision is based on the directive of RBI, and Essar Steel is only challenging the RBI’s directive. Therefore, not providing the minutes of meetings with lenders is not suppression of facts,” its lawyer Mihir Thakur said.
Thakur also said that the company was initially not told about JLF’s decision to initiate proceedings against it before the NCLT. Corporate insolvency restructuring was discussed as an option by Essar Steel at June 22 meeting of the JLF led by SBI, he said. Standard Chartered bank, which has also filed insolvency resolution proceedings against Essar Steel at the NCLT’s Ahmedabad bench, said it should be allowed to carry on with the proceedings as it is a foreign bank and not a “banking company” as per the Banking Regulation Act, and hence RBI’s directive did not apply to it.
The high court is hearing the Essar Steel’s petition challenging the RBI’s circular asking the banks to initiate action against it and eleven other accounts with over Rs 5,000 crore of outstanding loans each under the IBC.
Essar’s contention is that this directive was improper in its case, as the company is in an advanced stage of loan restructuring.
It should not be treated on par with other eleven accounts, as while these accounts are now closed, Essar Steel is still doing well with an annual turnover of Rs 20,000 crore, the company said.