Prashant Ruia, Director of Essar Group speaks to Bloomberg in an interview. (Photographer: Scott Eells/Bloomberg News)

Essar Steel: NCLT Admits Insolvency Case, Appoints Interim Resolution Professional

The Ahmedabad bench of the National Company Law Tribunal has admitted the insolvency case against Essar Steel and appointed Satish Kumar Gupta of consulting firm Alvarez & Marsal as the interim resolution professional. Consortium lender State Bank of India had proposed Alvarez & Marsal as IRP.

With this, the powers of the Essar Steel board stand suspended, as per provisions of the Insolvency and Bankruptcy Code, and the IRP takes over day-to-day management of the company.

Thereafter, a committee of creditors will be constituted and a resolution professional appointed, who could be the same as the IRP.

The resolution professional will formulate a resolution plan that must meet the approval of the committee of creditors. If that is not achieved within 180 days, with a provision for a 90 day extension, the company, or the assets in question, will go into liquidation proceedings.

The order in the matter had been pending since the NCLT reserved its decision on July 26, after listening to arguments by Essar Steel, SBI and Standard Chartered Bank.

Standard Chartered Bank and SBI have both filed insolvency petitions against Essar Steel.

Essar Steel has vigorously opposed the insolvency case, seeking relief from the Gujarat High Court but with no success. In its arguments, the steel company blamed its financial position on a change in government policy and claimed that insolvency proceedings would be detrimental to its interest as it is on the path to recovery. Essar Steel also claimed that appointing an IRP and suspending the board could hurt ongoing operations.

The steel company also questioned the RBI’s criteria for selecting Essar Steel and 11 other indebted companies for immediate action under the IBC.

Also Read: No Relief For Essar Steel In Bankruptcy Case

Essar Steel owes nearly Rs 45,000 crore to its lenders.

The central bank, through an internal advisory committee, has shortlisted 12 large stressed accounts for the insolvency process. These cases have been selected on the basis of a common criterion where the outstanding bank exposure was higher than Rs 5,000 crore and at least 60 percent of the exposure had turned non-performing as on March 31, 2016.

Freelance journalist Devshi Varotariya contributed to this report.