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RBI defends Feb 12 circular in SC, says no plan submitted by companies yet

In its submissions before the Supreme Court (SC), the regulator said that if the companies were ready with a plan, they should place it before the court

Aashish Aryan  |  New Delhi 

RBI
A Reserve Bank of India (RBI) logo is seen at the gate of its office in New Delhi. Photo: Reuters

Reiterating its stand on the February 12 circular, the Reserve Bank of India (RBI) on Tuesday said that the which were affected had not yet come up with a resolution plan, despite ample time having been given to them. In its submissions before the (SC), the regulator said that if the companies were ready with a plan, they should place it before the court.

“Let them place the plan before the court. The banks are here and they can consider it. We can give 15-30 days,” the counsel appearing for said. The banking sector regulator was responding to the power and sugar companies’ allegations that the February 12 circular was based on a ‘one-size-fits-all’ approach without considering the specific problems of the sector.

The 180-day deadline, the counsel said, had passed in September and yet no resolution plan had come from them. The debtors could have not been given infinite timelines, the counsel said.

On February 6, the had told the top court that the circular asking banks to move insolvency petitions against large non-performing assets (NPAs) that have not been resolved was based on a 'one-size-fits-all' approach without taking into consideration factors such as the reasons for non-payment.

There is no distinction between the kinds of debtors, the reasons for non-payment of the debt, or consideration for external factors influencing the sector, senior advocate Abhishek Manu Singhvi, appearing for one of the had told the court.

In its submissions on Tuesday, RBI rejected this allegation and said that neither it nor the banks took such an approach. They instead took note of the individual problems of the companies under each sector and decide accordingly, the RBI counsel said.

“The sector issues may be pertinent. When the banks restructure such loans, all issues of the sector are taken into consideration. But there were many ways of resolving. RBI circular nowhere says to proceed one way or other,” he said.

The banking regulator also flayed the challengers to its February 12 circular arguing that the problems in the respective sectors had not cropped up overnight. The companies, RBI said, were best situated to know the issues of their sector, the global and national position of the industry, and other economic hindrances.

“If they had reached an agreement with the banks, as they claim, they could have approached the National Company Law Tribunal (NCLT) and informed it that they were confident of finding a way. It would have been up to the to decide on that,” the RBI counsel said.

Some of the power and who have challenged the circular have alleged that they had almost completed the negotiation with the banks when the RBI circular came which forced the banks to withdraw from the table.

A two-judge Bench of Justice Rohinton Fali Nariman and Justice Vineet Saran is hearing a bunch of petitions moved by power, sugar, and shipping companies challenging the RBI's circular. On February 12, the RBI had asked banks and other lenders to either execute a resolution plan for big or file insolvency petitions against them in the

The court is hearing these petitions by dividing them into three categories. There are some companies that have challenged the validity of the Insolvency and Bankruptcy Code. The second group of companies have challenged the constitutional validity of the circular, and the third group, which consists mostly of power companies, have sought temporary relief from the circular only for themselves.

First Published: Wed, March 13 2019. 18:21 IST
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