IRP appointment will not impact Essar Steel operations, SBI tells NCLT

State Bank of India (SBI) on Tuesday informed the Ahmedabad bench of the National Company Law Tribunal (NCLT) that the appointment of an interim resolution professional (IRP) will not impact Essar Steel’s operations. The court was hearing an insolvency petition filed by SBI and Standard Chartered Bank against Essar Steel as part of a dozen accounts picked by RBI for resolution under the Insolvency and Bankruptcy Code (IBC). The bank’s counsel was replying to Essar Steel’s counsel Mihir Thakore who wondered if an IRP would be capable to run the company. “An IRP may not be able to run the company like the management and board does. The company is bound to follow the instructions of IRP but their suppliers, distributors and buyers are not,” he said. Thakore also argued that the JLF had no intention to initiate insolvency proceeding against the company and it was only after the Reserve Bank of India (RBI) direction, that lenders have referred it to NCLT. The case will be heard on Wednesday, July 26.

SBI leads a joint lenders’ forum (JLF) of 22 lenders, formed to look into Essar Steel’s debt restructuring. The consortium owns about 93% of the debt that Essar Steel owes to all lenders. Essar Steel owes lenders around Rs 45,000 crore, of which Rs 31,671 crore had become non-performing as of 31 March 2016. Meanwhile, Standard Chartered Bank and SBI have named different IRPs for Essar Steel. While SBI, in its application, suggested Satish Kumar Gupta of Alvarez and Marsal India as the IRP, Standard Chartered Bank suggested Dinkar Tiruvannadapuram Venkatasubramnian of EY. In its contention, SBI argued that since its consortium represented 93% of the lenders, the IRP suggested by the lead creditor should be appointed by the NCLT. The total debt of the Essar Group is estimated at Rs 1.17 lakh crore. Most private banks have sold off their Essar Steel exposure to asset reconstruction companies (ARCs), taking a haircut of more than 50%; most PSU banks have declared Essar Steel as an NPA.