15 April 2019: Although the Supreme Court has quashed the RBI’s February 12, 2018 order on non-performing assets (NPA), the cases admitted for resolution process based on the order would continue, as the NCLT admits cases only if it is sure of the default irrespective of any circular, said the Insolvency and Bankruptcy Board of India (IBBI) on Monday.
The apex court had on April 2 struck down the Reserve Bank of India (RBI)’s circular whereby the central bank had mandated lenders to initiate resolution or restructuring of loans worth Rs 2,000 crore or more even if the default was recorded for a single day.
“I think the proceedings are admitted by the National Company Law Tribunal (NCLT) on being satisfied of default, not whether it was initiated by the direction of somebody. The test is whether there is default or not. IBC proceeding is admitted if there is a default,” Sahoo told IANS, implying that the cases admitted due to the RBI order would continue as the NCLT found default.
“IBC proceeding is admitted if there is a default. NCLT would have satisfied itself that there was a default… NCLT does not consider whether SBI came and applied on its own or on the direction of somebody else.”
The IBBI Chairman also said that he is not aware of the specific cases admitted following the RBI order.
Earlier, IANS had reported that the lenders have decided to file an affidavit in the NCLT to continue insolvency proceedings against stressed power projects that were referred to the bankruptcy court on the basis of the February 12 circular of the RBI.
The Supreme Court’s April 2 order raised questions over the fate of about eight power projects including 3,600mw KSK Mahanadi Power Co Ltd, 1,920mw Lanco Amarkantak Power Ltd, 600mw Avantha Power, 1,350mw Rattan India Power Ltd, 550 MW RKM Powergen, and the 700 MW Bharat Utkal.
These projects were referred by a consortium of lenders including the Power Finance Corporation to the NCLT as per the provisions of the February 12 RBI circular, which said that it would be mandatory for projects in default to be referred to the NCLT after 180 days from start of the resolution period. As 180 days for these projects ended in August, they were referred to the NCLT.
RBI Governor Shaktikanta Das told reporters after the monetary policy meet on April 4 that the central bank will take take necessary steps including the issuance of a revised circular “as may be necessary for the effective resolution of stressed assets”.