SCB said it had filed the first insolvency plea against Essar. However, SBI said it was the lenders' consortium leader and could remove SCB's appointed IRP through a 75 per cent voting right in the creditors' committee. "Hence, the IRP suggested by us should be appointed on the admission of our application against Essar Steel," their counsel told the tribunal, chaired by Bikki Raveendra Babu.
SBI also argued that unlike the consortium that it led, SCB was an unsecured creditor. Hence, SBI had the right to have the professional suggested by it as the IRP. It wants Satish Kumar Gupta of Alvarez and Marsal India- the multinational entity that has a name for turnaround and restructurng business- to be appointed as the IRP.
Essar Steel owes its lenders around Rs 45,000 crore. Out of this, the SBI-led consortium accounts for around 93 per cent of the overall pending amount. Last year in March, around Rs Rs 31,671 crore was declared as bad loan, which soared to Rs 32,684 crore at the end of March in 2017.
Essar Steel's counsel reiterated its previous arguments that the company's operations would be affected with the initiation of insolvency proceedings against the firm.
The steel major has a crude steel production capacity of 10 million tonnes per annum and has several long-term contracts with central and state entities for the supply of raw materials and critical production consumables. With a production capacity of 80 per cent, it is expecting a turnover of around Rs 25,000 crore in FY18.
SCB and SBI had independently filed applications for initiating insolvency proceedings against Essar, for dues of Rs 34,000 crore from its units in Gujarat. Earlier, Essar had challenged these proceedings at the High Court in Ahmedabad, which dismissed the petition.
If the banks' petition is admitted, it would translate into the dissolution of the company's board of directors, while handing over control to the newly appointed IRP. The latter, under the IBC, gets 180 days to offer a workable solution for the dues, extendable by another 90 days. If no solution comes up, a liquidator would be appointed. The solution plan must be approved by the committee of creditors by a 75 per cent majority, and then be filed with NCLT.