The counsel for Reserve Bank of India (RBI) on Wednesday told the Gujarat High Court that all big defaulters are being taken through "a structured process" for faster resolution of the bad loan issue and that Essar Steel is not singled out.
The case was adjourned and will be heard again today.
Last week, Essar Steel had moved the high court against the step by RBI and banks to initiate insolvency proceeding against it in National Company Law Tribunal (NCLT) at Ahmedabad.
The court was hearing Essar Steel's plea, filed on July 4, against insolvency proceedings initiated against it at the NCLT by State Bank of India-led consortium of 22 lenders as well as Standard Chartered Bank.
In what could be a test case for RBI, which wanted to push insolvency resolutions of 12 companies under the newly formed Insolvency and Bankruptcy Code (IBC) 2016, Essar Steel moving the Gujarat High Court will decide the fate of the other cases waiting to be resolved through the same process.
RBI counsel Darius Khambatta told the Gujarat High Court that Essar Steel is not being singled out and all big defaulters are being taken through a structured process for speedy resolution of the bad loan problem plaguing the banking system.
He said that the IBC is "not draconian" and "protects interests" of the company. He said IBC will also help the company resolve and restructure the debt.
Khambatta said, "Records show that in Essar Steel's case, it was very far from completing the restructuring."
He said Essar owed lenders some Rs 45,000 crore in total, of which Rs 31,671 crore were non-performing assets (NPAs) as on March 31, 2016. He said this rose to Rs 32,864 crore as on March 31, 2017.
The RBI counsel was responding to Essar Steel's lawyers who questioned RBI's decision to push the company into insolvency proceedings, saying it was detrimental to its interest. The company pointed out it was in discussions with Standard Chartered Bank until June 21 over a possible restructuring plan which was also approved by the company's Board.
Essar Steel also had objections to the wording of the RBI circular which had stated that the 12 NPA accounts, with outstanding debt of over Rs 5,000 crore, would be accorded priority by NCLT. RBI in its corrigendum to the Gujarat High Court last week got the line deleted wherein the regulator had asked NCLT to accord priority to the 12 NPAs.
...& ANALYSIS
- Big defaulters are being taken through a structured process for speedy resolution of NPA problem
- Essar owed lenders some Rs 45,000 crore, out of which Rs 31,671 crore were NPAs
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