Essar Steel moves HC against bankruptcy proceedings at NCLT

Integrated steel producer Essar Steel Ltd has approached the Gujarat high court, challenging bankruptcy proceedings initiated by its creditors at the National Company Law Tribunal (NCLT) under the Reserve Bank of India (RBI) directive.

Essar Steel has submitted that it has been repaying its debt and has cleared debt to the tune of Rs3,467 crore in the year 2016-17.

Further, the company said it employs as many as 4,500 people and the insolvency process at the NCLT would transfer the administration to an interim resolution professional that would further complicate recovery.

Essar Steel said the company was in the midst of a restructuring and that the company was trying to restructure the package approved by its board of directors when the RBI came out with a notification classifying loans to certain companies with debt over a certain level as non-performing assets.

RBI, empowered by the amended Banking Regulation Act, directed banks to refer the 12 identified cases, including Essar Steel, directly to NCLT.

Essar Steel also pointed out that RBI's press release dated 13 June 2017 had set the effective date to initiate bankruptcy proceedings against the defaulting companies as 31 March 2016.

The matter will come up for hearing on 7 July, a company official stated.

Essar Steel also faulted the common criteria used by the central bank for categorising the 12 accounts as NPAs and asking lenders to the companies to file insolvency proceedings against them right away.

Last week, the State Bank of India (SBI) had filed an insolvency case against Essar Steel after receiving directions from the central bank to do so. The RBI's criterion was that the total banking exposure of the company should be at least Rs5,000 crore and 60% of this exposure should have turned non-performing by March 2016.

Essar Steel is a fully integrated flat carbon steel manufacturer with a current capacity of 10 million tonnes per annum, producing steel that caters to the needs of sectors such as automotive, white goods, construction, engineering and shipbuilding.

The company is also one of India's largest exporters of flat products, exporting to the highly demanding US and European markets, and to the growing markets of South East Asia and the Middle East.

Its major customers include Caterpillar, Hyundai, Swaraj Mazda, the Konkan Railway, and Maruti Suzuki.