# In the Matter of Essar Steel India Ltd. Vs. Reserve Bank of India & 3 Ors. Special Civil Application No. 12434-2017

> HC judgment dated 2017-07-17. Citation: TCN-2017-HC-00009. Essar Steel India Limited filed a Special Civil Application challenging the Reserve Bank of India's…

- **Court:** HC
- **Order date:** 17 Jul 2017
- **Citation:** TCN-2017-HC-00009
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/high-courts-chandigarh-bench/essar-steel-india-ltd-vs-reserve-bank-of-india-3-ors-special-civil-application-n-d146acf0

## Summary

### Background

Essar Steel India Limited filed a Special Civil Application challenging the Reserve Bank of India's (RBI) directive to banks to initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), 2016. The challenge is based on the grounds that Essar Steel's restructuring proposal was under active consideration, and the RBI's directive is discriminatory. The RBI issued a press release on June 13, 2017, directing banks to initiate insolvency proceedings against 12 companies, including Essar Steel, which the petitioner contends is in conflict with existing circulars and directions.

## Facts

Essar Steel India Limited (ESIL) is facing insolvency proceedings initiated by its lenders, including State Bank of India (SBI) and Standard Chartered Bank (SCB), following a directive from the Reserve Bank of India (RBI). The RBI issued a press release on June 13, 2017, directing banks to initiate insolvency proceedings against 12 companies, including ESIL, under the Insolvency and Bankruptcy Code (IBC), 2016. ESIL challenges this directive, arguing that it is discriminatory and conflicts with ongoing restructuring efforts. ESIL claims to have repaid Rs. 3467 Crores in the last 15 months and has significant operations across multiple locations. The company's debt is over Rs. 45,000 Crores, with a substantial portion classified as non-performing assets (NPAs). SBI and

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## Issues and analysis

### Issue 1: Whether the RBI's directive to banks to initiate insolvency proceedings against Essar Steel is …

**Ratio:** The power to issue directions under Section 35AA of the Banking Regulation Act, 1949,

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**Reasoning:** The court reasoned that while the RBI has the authority to issue such directives, it must

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**Interpretation:** The interpretation of Section 35AA is that it provides the RBI with the power

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**Application:** The court applied this ratio to the facts by stating that the NCLT should

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## Parties

- **Judges:** S.G.…
- **Respondents:** Essar Steel India…; Reserve Bank of…

## Timeline

- **2016-03-31 — NPA Classif…**: A significant portion of Essar Steel's debt…
- **2017-05-05 — RBI Communi…**: RBI communicated with Scheduled Commercial Banks regarding large stressed assets…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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