HC rejects Essar Steel's plea on insolvency

The Gujarat High Court on Monday dismissed Essar Steel’s writ petition challenging the insolvency proceedings brought against it by a consortium of banks on RBI directives.

The RBI directed the consortium of banks led by the State Bank of India to start insolvency proceedings against Essar Steel for holding Non-Performing Assets (NPAs) worth 31,671 crore as on March 31, 2016, while it owed lenders Rs 45,000 crore.

No relief
The court of Justice SG Shah on Monday issued an oral order stating that no relief could be granted to the steel major. The court is expected to issue a detailed order later.

The judgement is being seen as a big motivation for banks to tackle bad loans, especially for state-run banks who have seen their NPAs mount over Rs 6 lakh crore as of December 31, 2016.

The total NPAs in the banking system in the country, meanwhile, are estimated to be about Rs 10 lakh crore. In its petition filed on July 4, Essar Steel had challenged the RBI directive to refer the cases of 12 companies with high NPAs (including Essar) to National Company Law Tribunal (NCLT) and begin insolvency proceedings.

An amendment to the Banking Regulation Act had handed the central banks sweeping powers to crack the whip on bad loans.