SC orders ‘status quo’ on Jayaswal Neco’s insolvency proceedings

Source: The Hitavada      Date: 17 Apr 2018 08:30:03


 

Staff Reporter,


New Delhi,

Apex Court’s order effectively halts the insolvency proceedings

THE Supreme Court on Monday directed to maintain status quo in the insolvency process at the National Company Law Tribunal (NCLT) against Jayaswal Neco Industries Limited.
The petitioner company
challenged RBI’s directive to banks for initiating insolvency against it. It also questioned applicability of the internal communications, which the RBI is making to banks under the Banking Regulation (Amendment) Act, 2017, contents of which in some cases are retrospectively overriding published circulars.


A division bench consisting of Justice Ranjan Gogoi and Justice R Banumathi ordered a status quo which has effectively halted the insolvency proceedings against the company, for now.


Jayaswal Neco is a manufacturer of iron and steel and ferrous and non-ferrous casting products.
The total debt of the company stood at Rs 3,853 crore as of March 31, 2017. It reported a net loss of Rs 459 crore on revenues of Rs 2,516 crore in FY 2017.


Jayaswal Neco’s bankers include the State Bank of India, Union Bank of India, Punjab National Bank, IDBI Bank, Andhra Bank and UCO Bank among others.
The company has an iron and steel plant in Raipur and casting plants in Nagpur, Bhilai and Anjora.
Jayaswal Neco, is a part of Reserve Bank of India’s (RBI) second list and challenged the has today obtained status quo on its insolvency proceedings at the NCLT, by the Supreme Court.


Jayaswal is challenging Senior Counsel Harish Salve appearing for Jayaswal Neco contended
that the Reserve Bank of India (RBI) had failed to consider the Master Restructuring Agreement (MRA) that has been submitted in this regard. He added that the MRA had been backed by lenders as well.


The company had approached the Supreme Court against an attempt by RBI to push the company into insolvency proceedings on the grounds that certain technical considerations had not been met. It is one of the 28 companies in RBI’s second list of loan defaulters and was given time till 13 December to put forth its debt resolution plan with lenders.


Jayaswal Neco had filed a plea in the Bombay High Court seeking to implement its debt restructuring plan and save itself from insolvency proceedings.
However, the company failed in obtaining relief from the High Court which refused to interfere with the economic policy of the RBI, describing it as the function of experts, leaving it with little choice but to file special leave petition before the Apex Court.


The High Court also ruled that the decision of the RBI, which is a Banking Regulatory Authority, cannot be a matter of review under the writ jurisdiction.


Firstly, because the decision making process involves a specialised expertise and secondly, the satisfaction arrived at by the regulator, need not be substituted by the opinion of the Court. On the other hand, the State Bank of India (SBI) had moved the NCLT to initiate insolvency proceedings against Jayaswal Neco under provisions of the Insolvency and Bankruptcy Code, 2016 (IBC).


The Supreme Court has now ordered status quo, which in effect has halted the insolvency proceedings initiated by the State Bank of India at the NCLT against Jayaswal Neco.
Senior Counsel Harish Salve, Senior Counsel Mukul Rohatgi argued for Jayaswal Neco while Attorney General K K Venugopal, ex-AG Darius Khambata represented RBI.