In a major setback to Essar Steel, the Gujarat High Court today dismissed the company's writ petition challenging the Reserve Bank of India's directive to initiate insolvency proceedings against the steel major for its high non-performing assets.
The RBI had issued the directive to a consortium of banks led by the State Bank of India.
The oral order was issued by Justice S.G. Shah, who said that relief could not be granted to the company. More details are awaited.
The RBI had issued a directive to initiate insolvency proceedings against 12 companies, including Essar Steel on June 13. Essar Steel challenged the directive through a petition on July 4.
While the company maintained that it was a unilateral action at a time when it was undergoing restructuring and that it was being singled out, the RBI's counsel presented that it was untrue that the company was discussing restructuring of repayments with the banks. He had further said that the insolvency proceedings would help the company to shape up and not close it down.
The company had also categorically objected to the fact that it was being clubbed with 11 firms that were defaulting.
Earlier, during the hearings the RBI had said that the directive of initiating insolvency proceedings against 12 companies was based on advice of the internal advisory committee and that there was no document to support its directive against Essar Steel for initiating insolvency proceedings.
The steel major had a debt of over RS 45,000 crore and out of which over Rs 31,000 crore turned into NPAs for banks by the end of the financial year 2015-2016.