INSUBCONTINENT EXCLUSIVE:
NEW DELHI: The government, bankers and private power companies are seeking legal opinion to interpret the Supreme Court’s Tuesday order on
the RBI’s controversial circular because experts have diverging views on its implications on the resolution process.
They are seeking
clarity on whether the ongoing resolution process by lenders would be stalled, which is seen as damaging for the already troubled projects
Lenders to power sector are contemplating whether going ahead with the resolution proceedings will amount to contempt of court.
The order on
RBI’s plea to transfer all petitions to the apex court read, “Issue notice
Status quo, as of today, shall be maintained in the meantime
List all these petitions for final disposal on Wednesday, the 14th November, 2018.”
Senior advocate Jayant Bhushan, who appeared for RBI,
said there would be no insolvency proceedings against parties whose petitions RBI sought to transfer to the top court.
“Resolution
proceedings have got nothing to do with the RBI circular
The mandate to lenders to do something though the circular is challenged
Anything that the lenders can do without the RBI circular, can always be done, how can that be stayed”
“The order has to be interpreted
Therefore, there will be status quo as far as the RBI circular is concerned for these projects which were the subject matter of the transfer
Lenders were forced to do something, now they are not being forced
If they still want to do it, without being forced, they can certainly go ahead,” Bhushan said.
However, one of the state-run banks with
exposure to power companies, said, “We consulted the legal department, which has advised us we cannot carry on with the resolution
proceedings since it is a status quo
But in case the existing promotors have agreed to the resolution plan, we can implement them
In most resolution plans for management change, the existing promotors are on board.”
Another executive from a financial institution said
there are conflicting views on the implementation of resolutions since the apex court order is silent on the extension of the 180-day period
for completing the resolution plan.
Banks, members of the Association of Power Producers, Independent Power Producers Association of India,
South Indian Sugar Mills Association along with groups representing shipyards and textile makers had welcomed the order on Tuesday saying it
prevented their stressed assets from insolvency court.
Vishrov Mukherjee, partner at J Sagar Associates, which advised and represented
Association of Power Producers, GMR and RattanIndia before the Allahabad High Court and Supreme Court in challenging the RBI circular on
stressed assets, said the status quo will extend to parties before the Supreme Court including members of various associations including
Association of Power Producers and Independent Power Producers Association of India and a clarification from RBI is required.
“Banks and
financial institutions are unclear as to whether they can go ahead with ongoing resolution processes given that the cut-off date under the
12th Feb Circular was August 27
Given that the IBC route mandated by RBI is foreclosed for the time being, it is important for the RBI provide clarity so as to enable
lenders to continue with the resolution process within the framework of the February 12 circular
Putting a halt to these proceedings until November will not only be counter-productive but may result in further value erosion,” it said.
