In a major win for the Centre and its war on corporate bad loans, the Gujarat HC has rejected Essar Steel's plea against the RBI. On July 14, the court had reserved its order for Monday on Essar Steel's plea against July 13 RBI circular to banks to act under Insolvency and Bankruptcy Code against the steel major and 11 other firms with over Rs 5000 crore outstanding loans.
An RBI circular last month asked the banks to initiate action against Essar Steel and eleven other firms with over Rs 5,000 crore of outstanding loans each under the IBC. Essar Steel challenged it before the Gujarat High Court, saying that the directive was improper as the firm was already in an advanced stage of loan restructuring.
It should not be treated on par with the other 11 accounts because these accounts are now closed while Essar Steel is doing well with annual turnover of Rs 20,000 crore, the company said.
Essar Steel was referred to the NCLT despite the fact that it was in an advanced stage of finalising a restructuring proposal in accordance with earlier RBI circulars, it argued.
It wanted to be treated under the second category mentioned in the RBI's June 13 circular where NPA accounts under Rs 5,000 crore are to be given six months to finalise loan restructuring plans, the company said.
