500 NPA cases identified by RBI to get equal priority

The Gujarat High Court order would result in all 500 non-performing assets (NPAs) identified by the Reserve Bank of India (RBI) getting equal priority, compared to the banking regulator's earlier stance that only 12 top NPAs should be given top priority by the National Company Law Tribunal (NCLT).
 

The order, dated July 17, reveals the RBI was caught off guard when the HC asked on what basis it was issuing directions to the NCLT, a quasi-judicial body, on giving priority to the 12 cases. When asked for records before issuing the June 13 statement the RBI said there were no such records.

"In response to the query, there is a categorical admission, whereby, it is disclosed that there is no other document in which the decision to issue the press release has been recorded and no other document on the basis of which such decision is taken. However, there are subsequent specific directions issued to Bank. This also goes to show the manner in which the RBI is functioning, in as much as there is a press release even without a decision at certain level that press release is to be published and what should be included in such press release," the court said in its order.

The court said the RBI should exercise caution while issuing press releases and they must be in consonance with the Constitutional mandates, and in any case these releases should not be in the form of advice, guidelines or directions to judicial or quasi-judicial authorities such as the NCLT in any manner, whatsoever.

In its June 13 statement, the RBI had said the NCLT must give top priority to the 12 accounts, including Essar Steel that moved the Gujarat HC. The sentence "giving priority to 12 accounts by NCLT" was later deleted after the HC objected.

The court also said since the June statement referred to an earlier statement released on May 22, and since that statement contained a reference to the S4A (Scheme for Sustainable Structuring of Stressed Assets), which was introduced on June 13, it would be appropriate for the RBI to see that the benefit of all its schemes was offered and extended to all without any discrimination. "It is quite clear and obvious that Court has to see that there is no arbitrariness or discrimination by State or its authorities," the court said.

In its June 13 statement, the RBI had identified 500 accounts as on March 16, 2016, with more than Rs 5,000 crore of debt, and of this, 60 per cent of debt was declared as NPAs by banks. With the HC observations, all 500 accounts would now be accorded same priority by the NCLT.