State Bank of India on Thursday requested the Gujarat High Court to dismiss the petition filed by the Ruias-led Essar Steel, which challenged the insolvency proceedings initiated by its lenders.

In its argument, SBI said Essar Steel knew that the lenders were considering initiating insolvency proceedings against the company and hence the filing of a petition was a futile exercise.

Creditors’ meeting

Appearing for SBI, senior counsel Ravi Kadam informed the High Court that at the creditors’ meeting on June 22, “as many as eight high-ranking officials from Essar Steel were present, including Prashant Ruia, Director and promoter. The company came with a presentation and accepted at the meeting that SBI can approach the National Company Law Tribunal (NCLT) for insolvency proceedings.”

The company, after the lenders’ meeting, wrote a letter to SBI and said it would “participate in insolvency proceedings with the National Company Law Tribunal (NCLT)” and requested that the resolution professionals work “in a cohesive manner with the management of Essar Steel”. The SBI counsel said the petitioner had suppressed facts and vital information from the court and there was “sufficient reason to dismiss the petition”.

Both respondents, the Reserve Bank of India (RBI) and SBI demanded immediate discontinuation of interim relief given to the petitioner by the court in its earlier order.

However, Essar Steel’s senior counsel Mihir Thakor raised objection to the submissions made by the respondents and sought to clarify with counter arguments. The arguments will continue on Friday.

In its petition, filed on July 4, Essar Steel had mentioned that it was taken by surprise by the apex bank’s June 13 press release to initiate insolvency procedure under the NCLT against 12 top NPA accounts, even as the company was in the middle of debt- restructuring talks with its lenders.

StanChart stance

Meanwhile, in its arguments, Standard Chartered Bank underlined the fact that the petitioner was a guarantor for a $400 million loan to a Mauritius-based wholly-owned subsidiary Essar Offshore Mauritius.

“Since, the repayment was not coming through, the bank invoked the bank guarantee in 2015. But being a UK-based lender it did not fall under the Banking Regulation Act or under Reserve Bank of India (RBI)’s circular.

“Hence, we were not the part of the Joint Lenders’ Forum (JLF). Therefore, we have filed an identical petition with NCLT on our own merit,” the Standard Chartered counsel said adding that the company was put on notice to be taken to NCLT in January.

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