The Gujarat High Court has stayed further hearings on the insolvency petition filed by Standard Chartered against Essar Steel in the Gujarat Bench of the NCLT..Bar & Bench had recently reported this development, which relates to two consecutive events:.First one being a press release dated 13.06.2017 issued by the Reserve Bank of India (RBI) identifying 12 (undisclosed) non-performing accounts (NPA) by its ‘Internal Advisory Committee’. According to this Committee, the 12 NPAs account for about 25% of the country’s total bad loans. RBI also issued directions to banks to file for insolvency proceedings and that such cases will be accorded priority by the NCLT and;.Second one being the Joint Lenders Forum meeting led by State Bank of India (SBI) wherein it was decided to initiate proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) against three steel companies – Essar Steel, Bhushan Steel and Electrosteel Steels..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 resolution process is completed..A committee of (financial) creditors is also constituted during this period by the resolution professional and a number of decisions listed in Section 28 of the IBC are taken with 75% majority of the votes of members of the committee..And while SBI’s action against Jyoti Structures has received (Mumbai) NCLT’s nod, Essar was quick to move to the Gujarat High Court before any such order could be passed against it by the Ahmedabad Bench of the NCLT..Essar filed a ‘Special Civil Application’ against RBI in the Gujarat High Court, objecting to RBI’s press release dated 13.06.2017..Senior Advocates Mihir Thakore and Mihir Joshi argued for Essar Steel, who were briefed by Nanavati Associates..Essar Steels submitted that in the year 2016-17, they had cleared debt to the tune of ₹3467. It further contended that for taking action against such companies, the effective date is considered as 31.03.2016 though RBI press release is dated 13.06.2017..It was further argued that an admission by the NCLT of the insolvency application would transfer the administration of an otherwise healing company into the hands of an interim resolution professional..The Gujarat High Court, while staying any further proceedings in the matter, noted that the RBI’s decision (of 13.06.2017) to ‘prioritise’ these 12 particular cases has considered the effective date to be 31.03.2016, despite the notice being issued on 13.06.2017..“It would be appropriate for the NCLT to adjourn the matter, if any, listed before it before such date.”.The matter is posted for hearing on July 7, 2017..(Read the order)
The Gujarat High Court has stayed further hearings on the insolvency petition filed by Standard Chartered against Essar Steel in the Gujarat Bench of the NCLT..Bar & Bench had recently reported this development, which relates to two consecutive events:.First one being a press release dated 13.06.2017 issued by the Reserve Bank of India (RBI) identifying 12 (undisclosed) non-performing accounts (NPA) by its ‘Internal Advisory Committee’. According to this Committee, the 12 NPAs account for about 25% of the country’s total bad loans. RBI also issued directions to banks to file for insolvency proceedings and that such cases will be accorded priority by the NCLT and;.Second one being the Joint Lenders Forum meeting led by State Bank of India (SBI) wherein it was decided to initiate proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) against three steel companies – Essar Steel, Bhushan Steel and Electrosteel Steels..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 resolution process is completed..A committee of (financial) creditors is also constituted during this period by the resolution professional and a number of decisions listed in Section 28 of the IBC are taken with 75% majority of the votes of members of the committee..And while SBI’s action against Jyoti Structures has received (Mumbai) NCLT’s nod, Essar was quick to move to the Gujarat High Court before any such order could be passed against it by the Ahmedabad Bench of the NCLT..Essar filed a ‘Special Civil Application’ against RBI in the Gujarat High Court, objecting to RBI’s press release dated 13.06.2017..Senior Advocates Mihir Thakore and Mihir Joshi argued for Essar Steel, who were briefed by Nanavati Associates..Essar Steels submitted that in the year 2016-17, they had cleared debt to the tune of ₹3467. It further contended that for taking action against such companies, the effective date is considered as 31.03.2016 though RBI press release is dated 13.06.2017..It was further argued that an admission by the NCLT of the insolvency application would transfer the administration of an otherwise healing company into the hands of an interim resolution professional..The Gujarat High Court, while staying any further proceedings in the matter, noted that the RBI’s decision (of 13.06.2017) to ‘prioritise’ these 12 particular cases has considered the effective date to be 31.03.2016, despite the notice being issued on 13.06.2017..“It would be appropriate for the NCLT to adjourn the matter, if any, listed before it before such date.”.The matter is posted for hearing on July 7, 2017..(Read the order)