Insolvency plea against Essar Steel admitted

Insolvency plea against Essar Steel admitted”

Essar Steel is among the 12 accounts identified by the Reserve Bank of India (RBI) earlier for an immediate reference to NCLT under the Code. His name was recommended by SBI in its petition.

On Tuesday, the Ahmedabad bench of the NCLT had admitted ICICI Bank's plea to start insolvency bank proceedings against another large defaulter ABG Shipyard. While SBI's application suggested Satish Kumar Gupta of Alvarez and Marsal India to be appointed as IRP. Going by their leverage profile, the next lot of companies to be referred to the NCLT could include Videocon Industries (gross debt of Rs47,554 crore), Jindal Stainless (Rs 3,367 crore), Jaiprakash Power Ventures (Rs 21,098 crore), Aban Offshore (Rs 12,030 crore), IVRCL (Rs 3,579 crore), Uttam Galva Steels (Rs 5,041 crore), Punj Lloyd (Rs 6,126 crore), Soma Enterprises (Rs 1,895 crore) and Shree Renuka Sugars (Rs 6,012 crore). Essar Steel's Mauritius-based subsidiary had borrowed from Standard Chartered Bank for which Essar Steel's promoters were guarantors.

Under the IBC, a moratorium period of 180 days commences once an application filed by a creditor for initiating insolvency proceedings against a company is admitted by the NCLT.

Essar Steel owes more than Rs 45,000 crore to lenders, of which Rs 31,671 crore had already been declared as non-performing as of March 31, 2016. SBI leads a consortium of 22 lenders that account for 93 per cent of the company's debt. It was argued on behalf of Essar that SBI's petition was incomplete as it was not authorized by the bank's chairman.

Essar Steel, objecting to SBI and Standard Chartered's petitions, told the tribunal that the company had a crude steel capacity of 10 million tonnes per annum for which it has several long-term contract with central and state entities for supply of raw materials and critical production consumables, which are essential for running the manufacturing facilities of Essar Steel.

On 17th July, Gujarat HC turned down Essar Steel's appeal, observing that the regulator and banks are empowered to do so, giving a boost to the government's efforts to clean up the country's bad-loan mess.

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