RBI, SBI allege Essar Steel claims misleading, want bankruptcy proceedings vacated

AHMEDABAD: The Reserve Bank of India and the State Bank of India on Thursday pleaded before the Gujarat High Court that the stay on bankruptcy proceedings against Essar Steel be vacated. The court will hear arguments in the case Friday too.
State Bank of India and Standard Chartered Bank joined the Reserve Bank of India in claiming that Essar Steel was not revealing the correct picture of its journey to the bankruptcy proceedings and is presenting the facts selectively to suit its position.

SBI presented documents to the court backing its claim that Essar Steel was aware of the proceedings through the National Company Law Tribunal and its claims of not being informed was misleading. Essar Steel made a presentation on June. 22 where it accepted that SBI can certainly go for NCLT and suggest resolutions, if any, said SBI counsel.

“Based on this fact, which were not disclosed to the court by Essar Steel, the very interim relief order should be vacated” said SBI counsel Ravi Kadam

Standard Chartered Bank, another party in the litigation over the default, said it was not party to any loan restructuring plan that Essar Steel claims to have been finalised before the RBI diktat on June. 13 that led to banks initiating bankruptcy proceedings against 12 top defaulters.

`'We were not party to this restructuring process and we had informed the same to Essar Steel that it was done without our consent" Standard Chartered counsel told the court. ``The proposal was not acceptable to us’’ as the terms were not practicable.

Essar Steel proposed on January 24, 2017 a debt restructuring proposal offering to pay loan amount at the end of 25 years at 1% rate of interest.

Essar Steel which has defaulted on more than Rs. 40,000 crores of loans is contesting the RBI order that it be tried under the bankruptcy courts. The company says that its loans recast was almost finalised, but the delay by the banks and RBI’s arbitrary selection of March 2016 as a cut-off date is clubbing it with some other companies which are dysfunctional.

Reserve Bank of India on Wednesday told the Gujarat High Court it was not unfairly singling out Essar Steel for bankruptcy proceedings under the National Company Law Tribunal, instead blamed the company of suppressing facts of the case.

RBI counsel Darius Khambatta said that Essar Steel’s claim that it was not informed about the NCLT proceedings was wrong since a representative was present at a Joint Lenders' Forum meeting. The central bank has followed a scientific process to identify the 12 defaulters who should be tried under the bankruptcy law, said Khambatta.

State Bank of India substantiated with evidence to prove Essar’s claim wrong.

The bank provided the court with evidence of attendance June 22 Joint Lenders’ Forum meeting, where eight Essar Steel executives including directors Prasant Ruia, and J Mehra, attended the meeting.

“In the petition, Essar gave false statement that none of the bankers had a meeting or discussed the proceedings of NCLT” Kadam told the court.

The list of 12 defaulters were prepared by Internal Advisory Committee adopting scientific criteria, where those companies with a loan of Rs. 5,000 crores who have defaulted and where more than 60% of the loans have been classified as bad loans by banks.