The Hindu Business Line : Reprieve for Essar Oil directors; HC extends stay in Peerless case

DIRECTORS of Essar Oil Ltd, who were facing disqualification from the company's board following their alleged failure to honour their debenture payment obligation, got a reprieve from the Gujarat High Court on Thursday.

A Division Bench of the High Court has extended a stay on its earlier order disqualifying the directors, including the Ruias, till August 8 by when Essar Oil hopes to convince its creditors and debenture holders to accept the Corporate Debt Restructuring (CDR) programme proposed by the company.

"Considering the fact the (CDR) scheme proposed by Essar is being considered by the creditors on July 28 and in view of the large stake involved, the protection earlier given by the single judge must continue," the Bench said in the order.

In a judgment delivered on Tuesday, the High Court had said that the directors of the company stand to be disqualified from the board and be debarred from seeking re-appointment for five years. The judgment followed a petition filed by Peerless General Finance and Investment Company alleging that Essar Oil had failed to honour the debentures.

Essar had appealed against the judgement before the Division Bench.

The dispute pertains to the fully-paid non-convertible debentures carrying an assured interest rate of 14 per cent issued by Essar Oil to finance its 10.5 million tonne refinery at Vadinar in Gujarat.

As the refinery project got delayed, Essar Oil had to restructure its entire debt portfolio. Essar had offered a compromise scheme to its debenture holders and clubbed entities holding more than 2,000 debentures each with the CDR programme for financial institutions that had extended term loans for the project.

Peerless had objected to being clubbed with other financial institutions and dragged Essar to the court for not honouring its commitment of 14 per cent on the debentures.

The company holds about 28 lakh debentures of Rs 100 each worth about Rs 28 crore.

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