No additional document to back IBC directive: RBI
The Reserve Bank of India (RBI) on Friday admitted before the Gujarat high court that it had no additional documents to produce before the court that supported the decision-making process of the June 13 circular that was in the form of a press statement.
The central bank, by way of a press statement dated June 13, directed banks to refer a dozen cases, including Essar Steel, directly to National Company Law Tribunal (NCLT) for speedy resolution under the Insolvency and Bankruptcy Code (IBC).
The court is likely to pass an order on Monday for the ongoing matter on Essar Steel versus RBI wherein the company has filed a petition challenging the central bank’s June 13 directive.
Essar, in its petition before the court, said that it had initiated debt restructuring and was on a path of recovery, when the central bank, by way of a press statement dated June 13, directed banks to refer a dozen cases, including Essar Steel, directly to the NCLT.
Essar Steel has challenged RBI’s June 13 decision, saying it was “arbitrary” in nature and has challenged the central bank’s move to include the company among 12 defaulters.
RBI’s senior counsel Darius Khambata said in his submission to the court that the June 13 press statement was based on the recommendation of a highlevel internal committee and that they had no other documentary evidence other than the press release itself to support their decision.
During the proceedings on Friday, justice S G Shah, before whom the matter is being heard, asked RBI’s counsel to submit the basis on which the June 13 statement was filed.
Khambata said there were no such documents that could be produced before the court. He further said that following the press release, RBI had started sending directives to banks to start proceedings against the petitioner.
Justice Shah said that the court precluded RBI to produce such document in future.
Essar Steel owed lenders around ₹45,000 crore in total, of which ₹31,671 crore were nonperforming assets (NPAs) as on March 31, 2016. RBI’s criterion for selecting a dozen companies, as mentioned in the June 13, press statement, was that the total banking exposure of the company should be at least ₹5,000 crore and 60% of this exposure should have turned non-performing by March 2016.
Khambata told the court that Essar Steel had tried to suppress facts and made false statements while filing the petition.
Mihir Thakore, senior counsel of Essar Steel, said that they had challenged RBI’s June 13 circular and any communication with the company after that was not relevant to the case.
He said that in a meeting of Joint Lenders Forum (JLF) on June 13 and 17, the core committee had only deliberated on the finer contours of the debt restructuring proposal and highlighted 22 open issues that need to be resolved before finalization of the proposal and had not considered the option of initiating insolvency resolution process.