Before the consortium of creditors could file their petition in the NCLT, Standard Chartered Bank filed a case against Essar Steel with the NCLT
Putting spokes in the lenders' plan to move Essar Steel for resolution under the newly constituted Insolvency and Bankruptcy Code (IBC) 2016, Gujarat High Court on Wednesday stayed the insolvency proceedings filed by Standard Chartered Bank in National Company Law Tribunal (NCLT) until the single bench hears the case on July 7, according to sources.
Before the consortium of creditors could file their petition in the NCLT, Standard Chartered Bank filed a case against Essar Steel with the NCLT.
When Essar moved the Gujarat High Court against the insolvency proceeding, the bank also filed a case in the high court so that the proceedings under the NCLT can progress without interruption.
The court has directed the bank to move to the single judge bench from the division bench where the petition was filed on Wednesday.
Now, both the cases relating to Essar Steel, the one filed by the company challenging Reserve Bank of India's directive of shortlisting 12 companies to be resolved under the IBC as well as the banks' case will come up for hearing on July 7.
The consortium of lenders who were to file the application with the NCLT in Ahmedabad said they will also put up a strong fight against the company who is trying to delay the resolution process.
Essar Steel on Tuesday filed a 'Special Civil Application' against RBI in the Gujarat High Court, objecting to RBI's press release of June 13, 2017, where it said that an internal committee of the central bank had identified 12 accounts to be tried under the new Bankruptcy law, 2016.
According to this committee, the 12 NPAs account for about 25% of the country's total bad loans. RBI also issued directions to banks to file for insolvency proceedings and that such cases will be accorded priority by the NCLT.
The counsels for the company argued that an admission by the NCLT of the insolvency application would transfer the administration of an otherwise healing company into the hands of an interim resolution professional.
Essar Steel submitted that in the year 2016-17, they had cleared debt to the tune of Rs 3,467 crore. It further contended that for taking action against such companies, the effective date is considered as 31st March, 2016 though RBI press release is dated 13th June, 2017.
The application filed by a financial creditor under Section 7 of the IBC is admitted by the NCLT. Then a moratorium period of 180 days during which Board changes are implemented. During this moratorium period, the Board of the defaulting entity is replaced with a resolution professional, who discharges the functions of the Board till the time resolution process is completed. A committee of (financial) creditors is also constituted during this period by the resolution professional and a number of decisions listed in Section 28 of the IBC are taken with 75% majority of the votes of members of the committee.
On Tuesday, the Mumbai division of the NCLT gave a nod for the lenders' consortium led by State Bank of India (SBI) for action against Jyoti Structures. Essar Steel was quick to move to the Gujarat High Court before any such order could be passed against it by the Ahmedabad Bench of the NCLT.
...& ANALYSIS
- Consortium of lenders said they will also put up a fight against the company delaying resolution process
- According to an RBI committee, 12 NPAs account for about 25% of India’s total bad loans
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 "Essar Steel")
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