A bench of Justice S G Shah reserved the judgement for July 17 after conclusion of the arguments by the steel major and those of the Reserve Bank of India and the State Bank of India.
The bench had earlier stayed the insolvency proceedings against Essar Steel before the National Company Law Tribunal (NCLT) as an interim measure on its plea.
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Essar Steel had moved the court against the June 13 RBI circular contending that the order was improper as the firm was in an advanced stage of loan restructuring.
The company argued before the HC that it should not be treated on par with other eleven accounts (firms) which have been closed now, while Essar Steel is still doing well with an annual turnover of Rs 20,000 crore.
The RBI last month had identified 12 accounts (companies) for insolvency proceedings with each of them having over Rs 5,000 crore of outstanding loans, accounting for 25 per cent of the total Non-Performing Assets (NPAs) of banks.
During today's hearing, Essar Steel's counsel Mihir Thakore argued that the SBI and other lender banks under the Joint Lenders Forum may not have approached the NCLT for insolvency proceedings, had the RBI not issued the circular.
The company was challenging the RBI's directive, not the SBI's decision. The State Bank was asked by the RBI to file a case before the NCLT against Essar Steel through the circular, advocate Thakore said.
The action was a violation of his client's fundamental right to equality before the law and equal protection of the law under Article 14 of Constitution, he said.
Though the Insolvency and Bankruptcy Code is in force since December 2016, the lender banks did not opt for insolvency proceedings because they knew it would "jeopardise company's operations" as suppliers may stop supplying material on learning about such action, Thakore said.
RBI counsel Darius Khambata said the steel firm had suppressed facts and misled the court to get a favourable decision.
He argued that though Essar Steel at one point "even agreed to go to NCLT," the company did not mention it in the petition. Had it mentioned it in the petition, the court would have disposed of the case immediately, Khambata said.
"The company was aware about SBI's action. They were also aware that lenders will file for insolvency proceedings ... You can not play games with the court. This court is being misled," the RBI lawyer said.