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Essar Steel argues against SBI’s insolvency petition before NCLT

LiveMint logoLiveMint 24-07-2017 Maulik Pathak

Ahmedabad: Essar Steel Ltd’s lawyers on Monday raised technical objections to the insolvency petition filed by State Bank of India (SBI) before the National Company Law Tribunal (NCLT) in Ahmedabad.

Essar’s counsel Mihir Thakore said SBI’s petition was incomplete as it was not authorized by the bank’s chairman. He quoted a section of the State Bank of India Act 1955 which deals with the power of the chairman. Thakore argued that as per records submitted to the tribunal, the person who signed the application did not get authorization from the chairman. He also said there was no document showing the SBI board authorized the chairman to file such a petition. He called for a revised application to be filed.

Essar is one among the 12 companies identified by the Reserve Bank of India (RBI) for early bankruptcy proceedings.

Secondly, Essar lawyers also argued that the hearing should be done in two stages—one for admitting or dismissing the application and the second for appointing an interim resolution professional (IRP), if a petition is admitted. They argued that provisions of the insolvency and bankruptcy code give NCLT up to 14 days for appointing an IRP once a petition is admitted. They added that once an order is passed for admission of petition, the respondent should get a chance to approach a higher authority such as National Company Law Appellate Tribunal.

Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016.

SBI and Standard Chartered Bank had moved NCLT in June to initiate insolvency proceedings against Essar Steel, the former after an RBI circular grouped the steelmaker among 12 big defaulters. But the steelmaker moved the Gujarat high court saying the RBI diktat was arbitrary and discriminatory. The court earlier this month dismissed its plea.

SBI led a consortium of 22 creditors, that is owed 93% of Essar Steel’s debt, and this group has decided on an IPR, said Ravi Kadam, the senior counsel for SBI. He said at a 22 June meeting of lenders, Essar’s management had accepted the bank’s move to approach NCLT and had even given suggestions for appointment of IRP. “The core committee of lenders of Essar Steel, in a meeting on 13 June, suggested 25 open issues with the firm’s debt restructuring proposal… we are under no obligation to keep on negotiating. With the new IBC framework in place, we have an option for resolution of debt in a time-bound manner; hence, we have approached NCLT,” he said.

SBI had approached NCLT on 30 June.

Counsel Kamal Trivedi, who appeared on behalf of Standard Chartered, said a winding-up notice had been served to Essar Steel in December 2016 after it defaulted on the payment. He said Essar Steel had also not disputed the IRP named by Standard Chartered in its petition. The tribunal has reserved the order for 27 July when the next hearing is scheduled.

Separately, the Chandigarh bench of NCLT, while admitting the petition against Amtek, also okayed the appointment of Dinkar Venkatasubramanian, partner, transaction advisory services, at EY, the consulting firm previously known as Ernst and Young, as IRP. The firm did not object to the admission and requested the court to also consider its resolution plan, said a lawyer aware of the order on condition of anonymity.

Gopika Gopakumar contributed to this story.

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