Ahmedabad:

In another major jolt to Essar Steel, the Ahmedabad bench of National Company Law Tribunal (NCLT) today admitted the insolvency petition against it for loan-default filed by lenders State Bank of India (SBI) and Standard Chartered Bank (SCB) whose consortium forms over 90% of the total Rs 45000 crore debt owed by the company of which Rs 32864 crores have been declared as bad loan in March this year.

The tribunal bench, chaired by Justice Bikki Raveendra Babu, in his order rejected Essar Steel’s plea to not initiate insolvency proceedings against the company under the Insolvency and Bankruptcy Code (IBC) 2016, since a debt-restructuring plan was underway with the lenders. It also appointed SBI-nominated Satish Kumar Gupta of Alvarez and Marsal India as the interim resolution professional (IRP) for Essar Steel.

London based SCB, which had lended Rs 3700 crores to Mauritius based subsidiary of the company and SBI had independently filed applications for initiating insolvency proceedings against Essar Steel.

However it was not yet clear whether Essar Steel would challenge the NCLT order before the National Company Law Appellate Tribunal or not.

Notably in a tough stance against major bank loan defaulters. on June 13, this year Reserve Bank of India (RBI) had issued a circular asking lender banks to act under Insolvency and Bankruptcy Code against Essar Steel and 11 other firms each having over Rs 5,000 crore of outstanding loans.
The outstaniding bad loan to these 12 companies (accounts) including Essar Steel, accounted for 1/4th or 25% of the total banking sector NPA’s. On June 27 Insolvency proceedings at NCLT was initiated against Essar Steel which on July 4 moved to Gujarat High Court which stayed the NCLT proceedings till the hearing of the matter. On July 17 the high court disposed of Essar Steel petition asking it to go to NCLT.

On July 24 Essar formally challenged the SBI application in NCLT here on technical grounds. After hearing both the sides the Ahmedabad bench of NCLT reserved its order on July 26, which it delivered today.

DeshGujarat