Abhishek Manu Singhvi Gave A Big Relief To The Companies Holding 2.5 Lakh Crore Rupees Loan, Supreme Court Quashed RBI Circular

The Supreme Court canceled the 2018 strong circular of the Reserve Bank of India (Tuesday) (April 2) giving relief to the power companies stuck in the financial crisis, in which there is a provision to declare the company to be bankrupt at a one-day lapse in repaying the loan. This decision of the Supreme Court has provided relief to 75 companies, which was in debt of Rs 2.24 lakh crores.

After this circular came, these companies failed to repay the loan. In its 84-page order, Justice R. F. Nariman and Justice Vineet Saran said that the directive to adopt banks' path to bankruptcy and credit redressal disability (IBC) is beyond the powers of Section 35AA of Banking Regulation Act.

However, this order of court can slow down the bankruptcy proceedings. This decision can affect the process of early settlement of trapped loans under the circular. Banks may have some flexibility in relation to the restructuring of debt-trapped in the recovery.

The Reserve Bank had issued circular on February 12, 2018, and said that banks will have to initiate a debt settlement process within 180 days in case of default in debt cases of Rs 2,000 crore or more.

It was stated that if no solution can be found in the prescribed period, non-executed accounts should be placed before the National Company Law Authority under the Bankruptcy and Debt Disposing Inability Act.

Organizations of GMR Energy Ltd., Ratan India Power Ltd., Association of Power Producers, Independent Electricity Products Organization IPPA, Sugar Manufacturing Association of Tamil Nadu and Gujarat companies of the ship making companies had filed petitions in different courts against the circular.

The power sector argued that the debt of Rs 5.65 lakh crore (in the case of March 2018) is due to factors which are beyond their control. Such as the availability of fuel and coal block allocation cancellation. Earlier, the Supreme Court had banned this circular on September 11 last year.