SC move to split pleas challenging constitutional validity of IBC
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The matter has been fixed for segregation of cases on Friday while the hearing will be held at a later date, sources said. “The matters related to validity of IBC proceedings challenged by South Indian Sugar Mills Association and Bhushan SteelNSE -0.54 % & Power will be heard first and then petitions challenging the RBI circular will be taken up,” they said.
The Supreme Court had on September 11halted insolvency proceedings against defaulters in the power, sugar, shipping and textile sectors by staying the RBI circular. The bench, comprising Justices RF Nariman and Indu Malhotra, directed parties to maintain status quo while transferring about a dozen cases on the matter in various lower courts to itself.
“The court directed that a list of all matters pertaining to the RBI circular be handed over to it. Based on the list, matters would be segregated into IBC challenge matters and RBI circular matters. The court will fix a date for hearing for both batches on Friday and indicated that the IBC matters will be taken up first,” they said.
Private power companies and bank employees union have challenged the controversial circular saying it is ultra vires the RBI Act as it infringes lenders’ discretion to move defaulting loan accounts. The RBI circular mandated lenders to initiate insolvency proceedings against all defaulters after August 27.
Industry experts said this will give banks more time to resolve stressed assets that they wish to settle outside bankruptcy court.
Association of Power Producers director-general Ashok Khurana said, “This provides time to bankers to finalise the pending resolution plans of about 13 GW. As we understand from bankers, the main stumbling block in resolving this capacity is the requirement of 100% approval of lenders. This condition must be aligned to IBC code wherein the government amended Section 12(2) of IBC and brought down the threshold of approval to 66%. Only this change in RBI circular will help in expeditious resolution of these 13 GW plants.”
In case of stressed power assets, banks have not been able to close deals for none of the 13 GW power projects for which resolution proceedings were initiated a few months ago.
Cases like the 600-mw Jhabua power plant of Avantha Power and Prayagraj Power Gen Corp’s 1980-mw Bara power plant, both in Madhya Pradesh, looked closest to resolution but resolutions could not be finalised due to lack of consensus among bankers. No headway has been made in long pending resolution proposal of projects like 1,320-mw RattanIndia Amravati plant in Maharashtra and 1370-mw GMR Chhattisgarh Energy Ltd. #casansaar (Source - Economic Times)
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