Essar Steel in its petition to the Gujarat High Court has said that the Reserve Bank of India (RBI) has taken into consideration “irrelevant factors in determining the accounts to be referred under Insolvency and Bankruptcy Code and has ignored all relevant factors” and also violated the principles of natural justice. According to the company’s petition, which was admitted by the court on Tuesday and a hearing will take place on Friday, the RBI has arbitrarily taken a cut-off date of March 31, 2016 for determining the date for initiating the petition. “The decision has been taken in complete violation of principles of natural justice. If the petitioner had been given notice or would have been heard, the petitioner would have been able to present before RBI that after March 31,2016, there has been a sea change in the operations of the company as well as repayment of debt,” it added.
The petition added that if subsequent events had been taken into account, “no reasonable person” would have come to a conclusion that the banks should be directed to file a petition under Bankruptcy Code against the company. It said that State Bank of India (SBI) and the joint lenders’ forum (JLF) failed to appreciate that business and operation of Essar Steel had “substantially improved in the past one year and the petitioner had repaid an amount in excess of R3 467 crore to the bankers during the last one year”.
The company has also challenged the failure of the consortium of banks to continue the implementation of the revival package approved by the board of the company and approved in-principle by the bankers. FE has earlier reported that bankers are anxious over the resolution process for the 12 large bad loan exposures, identified by the RBI, could be disrupted after Essar Steel approached the Gujarat High Court on Tuesday. The company said in the petition that if action was taken under the provisions of Section 7, 16 and 17 of the IBC (Insolvency and Bankruptcy Code), the administration of the company would go into the hands of IRP and it would result in a closing down of the company.
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Bankers are hoping the Court will rule in favour of the notification of the RBI when the matter comes up on Friday. In the meanwhile, SBI and Standard Chartered Bank have filed separate applications with the Ahmedabad National Company Law Tribunal (NCLT) but these are yet to be admitted. The total debt of Essar Group is estimated at Rs 1.17 lakh crore – Essar Oil debt at Rs 30,000 crore, Essar Steel debt at Rs 44,000 crore, Essar Power at Rs 20,000 crore and Essar Global Fund at another Rs 23,500 crore.