Bankers are anxious the resolution process for the 12 large bad loan exposures identified by the Reserve Bank of India (RBI) could be disrupted after Essar Steel approached the Gujarat High Court on Tuesday. The company said in a petition 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.
With the next hearing on July 7, bankers hope the court will rule in favour of the RBI notification. Meanwhile, State Bank of India and Standard Chartered have filed separate applications with the Ahmedabad National Company Law Tribunal (NCLT) but these are yet to be admitted.
According to a senior banker, companies should benefit from the insolvency proceedings as the IRP and the committee of creditors would finalise a resolution plan within 180 days. “With other measures to recover the money having failed, NCLT appears to be the best option at the moment, not only for lenders but borrowers as well,” he said.
He added that even if the judgment does not favour Essar Steel, other firms might also move high courts across the country to delay the proceedings. Essar Steel on Tuesday moved the Gujarat High Court against RBI, SBI, Standard Chartered Bank and NCLT, seeking relief against bankruptcy proceedings stating that the RBI notification arrived even while the firm was trying to implement a board-approved restructuring package. After hearing the arguments, justice SG Shah ordered the Ahmedabad NCLT to adjourn Essar Steel’s case listed for hearing.
“Practically until May 19, the firm was trying to restructure the package approved by its board of directors, but before any concrete decision has been arrived at between the parties, all of a sudden a notification in the form of press release dated June 13 by the RBI has come in picture,” it said.
The company said that it has repaid almost Rs 3,467 crore in last one year. It added that it employs 4,500 people and the company would be “revived in view of serious effort of revival of the company by the company and the bank also by settling the accounts suitably”.
With FE inputs