SBI v/s Essar steel india Limited
This is a lawsuit filed by State Bank of India against Prashant S Ruia of Essar steel India Limited in the Supreme court of India, 2021for Debt Recovery of Loans.
In this case of SBI vs Prashant S Ruia, 2021, the State Bank of India (SBI) had filed a petition against Prashant S Ruia, the promoter of Essar Group, in the National Company Law Appellate Tribunal (NCLAT). The case was related to the resolution plan approved for Essar Steel, which had been undergoing insolvency proceedings.
Facts:
In 2008, Essar Steel had taken a loan of Rs. 1,200 crore from SBI, and had pledged certain properties as collateral for loan. In 2013, the company defaulted on the loan, and SBI initiated proceedings to recover the amount. In 2017, the National Company Law Tribunal (NCLT) admitted a petition filed by SBI under the Insolvency and Bankruptcy Code, 2016, and appointed an interim resolution professional (IRP) to manage the affairs of the company. In 2018, the IRP invited bids for the sale of the company, and in 2019, it was acquired by ArcelorMittal.
However, Prashant S Ruia, the promoter of the Essar Group, contested the sale of the company, and filed a petition in the Supreme Court challenging the order of the NCLT. He argued that SBI had not followed due process while initiating proceedings under the Insolvency and Bankruptcy Code, and that the company had not been given an adequate opportunity to repay the loan.
The case went through multiple rounds of litigation, including the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court of India. In November 2019, the Supreme Court upheld the resolution plan submitted by ArcelorMittal and ordered its implementation.
Judgement:
On 15th January 2021, the Supreme Court dismissed the petition filed by Prashant S Ruia, and upheld the sale of Essar Steel India Limited to Arcelor Mittal. The court held that SBI had followed due process while initiating proceedings under the Insolvency and Bankruptcy Code and on February 2021, SBI filed a contempt petition against Prashant S Ruia and other members of the Ruia family for allegedly obstructing the implementation of the resolution plan. SBI claimed that the Ruias had created obstacles by challenging the plan in various courts and delaying the handover of Essar Steel to ArcelorMittal.
The court also observed that the petitioner had not made any efforts to repay the loan, and that the sale of the company was a “bona fide resolution plan” that was approved by the Committee of Creditors. The court further noted that the sale of the company would result in the resolution of a stressed asset, and would benefit all stakeholders, including the employees of the company.
Conclusion:
The judgement in the case of SBI vs Prashant S Ruia was passed on March 2021, where the Supreme Court dismissed the contempt petition, and reaffirms the importance of following due process while initiating proceedings under the Insolvency and Bankruptcy Code, and upholds the principles of corporate insolvency resolution and the interests of all stakeholders. It also highlights the need for promoters of companies to take timely steps to repay loans, and to cooperate with creditors in the resolution of stressed assets. The court also cautioned the Ruia’s against creating any further obstacles in the implementation of the resolution plan.
Presented by,
Shubham Pal