Letter to BS: SC respite for stressed firms a case of judicial activism

I find from the Business Standard edition dated September 12 that the Supreme Court has asked banks not to refer any case for insolvency under the Reserve Bank of India’s circular instructions dated February 12, 2018, and the next hearing of the case has been fixed for November 14, 2018 (“SC respite for stressed assets”, September 12). This is an unfortunate development due to judicial activism. Judicial activism is welcome when the executive issues orders that are discriminatory or that violate certain fundamental rights under the Constitution. 

The Reserve Bank of India (RBI) is the central bank of the country and because of its expertise it has been entrusted with certain important statutory functions in the interests of the financial and banking sector of the country. It is supposed to have the expertise in relation to these matters and hence its directives should not be interfered with by the judiciary so long as there is no discrimination with regard to the application of its directives. The courts had, in the past, taken the correct stand that it should not arrogate to itself expertise in all matters and so long as there has been no discrimination in the application of the Reserve Bank directives, it would not interfere. Thanks to the interference — even if it is from the highest court of the country — the RBI would be justified if it takes a stand that it would be absolved of all its responsibility in the matter of resolution of stressed assets of the financial sector.

A Chandramouliswaran, former executive director, RBI

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