The Gujarat High Court asked the Reserve Bank of India on Thursday to submit documents supporting its June 13 directive to refer 12 large corporate NPA (non-performing assets) accounts as priority for insolvency and bankruptcy proceedings.
The court gave its directive while hearing Essar Steel's case against the central bank, which challenged its selection among the 12 accounts over and above other defaulters.
The court adjourned the matter by a day and will now hear the matter on Friday.
Lawyers representing RBI argued that the company was “misguiding” the court, adding that Essar Steel had been informed before the insolvency case was filed.
The RBI counsel argued that it was well within its powers to pass general or a special order to invoke Insolvency and Bankruptcy Code (IBC) and the notification was “not made on imaginary grounds but based on strong facts”.
RBI further said that any order on restraining IBC proceedings will impact other 11 NPA accounts. Most of the 12 companies are awaiting the verdict from Gujarat High Court for further action after being sent to the National Company Law Tribunal.
Essar had argued that it was not given enough opportunity to present its position before the insolvency case was filed at the NCLT. At the time, lenders were already discussing a restructuring plan approved by the company’s board and it required six months to implement it.
The central bank said that its action against Essar Steel is “neither unjust nor outrageous” and lenders were nowhere close to extending a recast plan to Essar Steel and so there is no qualification in Essar Steel's plea to be put in the category of NPA 2 accounts.
In its petition filed in the Gujarat High Court on July 4, the Ruia-family owned, privately held company sought to challenge the RBI’s decision, the insolvency proceedings initiated by State Bank of India Ltd. and Standard Chartered Bank at the NCLT in response tothe RBI’s directive.
The same Gujarat bench had a week ago directed RBI to delete from its June 13 circular a line that asked NCLT to hear the insolvency cases on priority.