Ahmedabad: Essar Steel on Tuesday told the National Company Law Tribunal (NCLT) that it needs more time to file objections to the insolvency proceedings initiated against it by its creditors, including State Bank of India (SBI) and Standard Chartered Bank.
A single-judge bench at the Ahmedabad NCLT, where the matter came up for hearing on Tuesday, has scheduled the matter for 24 July. The court has, meanwhile, directed Essar Steel to file its submission by 22 July.
Essar Steel owed lenders around Rs45,000 crore, of which Rs31,671 crore had become non-performing as of 31 March 2016.
SBI and Standard Chartered Bank had moved NCLT in June to initiate insolvency proceedings against Essar Steel. Their move came after the Reserve Bank of India (RBI), through a 13 June circular, directed banks to initiate insolvency proceedings at NCLT against 12 companies, including Essar Steel.
Essar Steel had challenged RBI’s directive at the Gujarat high court, which temporarily halted insolvency-related proceedings against the company at NCLT till the high court gave a final order.
The court, however, dismissed Essar Steel’s petition on Monday, paving way for the company’s creditors such as SBI and Standard Chartered Bank to continue their proceedings before NCLT where the matter was listed for hearing.
Essar Steel, in its petition to the high court, had said that the company had initiated the restructuring process and was in the close negotiations with its creditors, but SBI and Standard Chartered Bank approached NCLT based on RBI’s directive.
SBI-led a consortium of 22 creditors at the Joint Lenders’ Forum that was formed for the company’s debt restructuring.
SBI and Standard Chartered Bank lawyers told NCLT that the company had got enough time to file its reply to NCLT and that the insolvency proceedings should not be delayed further.
Essar Steel lawyers sought time from NCLT saying that their petition in the high court was against the RBI and that the company needed some more time to file its reply.
“The JLF restructuring of the petitioner had proved ineffective and was nowhere near completion," the high court had said on Monday, while dismissing Essar Steel’s petition.
Essar Steel’s Mauritius-based subsidiary had borrowed about Rs3,400 crore from Standard Chartered Bank for which Essar Steel’s promoters were guarantors. The company has defaulted in its payment and its proposal to repay the amount in 25 years’ time at 1% interest to the bank was not acceptable to them, Standard Chartered lawyer Kamal Trivedi told NCLT on Tuesday.
As per the Insolvency and Bankruptcy Code, 2016, once the application filed by a financial creditor under Section 7 of the IBC is admitted by the NCLT, a moratorium period of 180 days commences. During this moratorium period, the board of the defaulting entity is replaced with a resolution professional, who discharges the functions of the board till the time the resolution process is completed.