Essar SteelBSE 0.41 %, which failed to get a court stay on the bankruptcy proceedings against it moved by State Bank of India, told the National Company Law Tribunal (NCLT) that the insolvency petition was incomplete and not maintainable.
The application should have been signed by the chairman of the bank and there was nothing to prove that the board of directors of the bank had authorised the chairman to initiate such proceedings, the steel company’s counsel said. Absence of these two is a sufficient reason to disqualify it, he argued before the Ahmedabad bench of the NCLT.
As per Section 27 of SBI Act of 1955, specific power can be exercised only if there are specific and general directions to the chairman approved and conferred by its central board, he said. Arguments will continue on Tuesday.
The Gujarat High Court had earlier dismissed Essar Steel’s plea against a Reserve Bank of India (RBI) directive asking lenders to initiate bankruptcy proceedings against the debt-laden firm. Essar Steel is among a dozen of the biggest defaulters against which the RBI has directed action as part of a banking system clean-up.
Meanwhile, at the NCLT, SBI found a rival claim from Standard Chartered Bank. While SBI is leading a consortium of lenders, Standard Chartered is pursuing its case separately and is seeking to appoint its own insolvency professional to recover arrears from the company.
SBI said the insolvency appeal should be admitted on its petition as the consortium that it represents accounts for 93% of Essar Steel’s bad debt. According to the consortium, Essar Steel owes the banks more than Rs 45,000 crore.
