The Supreme Court on Tuesday (April 2) declared RBI’s Feb 12 circular asking banks and other lenders to either implement a resolution plan for big strained balance sheet or file bankruptcy petitions against them in the NCLT as ultra vires.

The bench comprising Justices Rohington Fali Nariman and Vineet Saran delivered the judgment while acting on the bunch of petitions transferred from various high courts to the Supreme Court raising concern over the maintainability of Feb 12 circular.

The petitions have been filed by companies in the power, ship-building, fertilizer, sugar industries etc.

The RBI circular had mandated resolution of loans of Rs 2,000 crore and above even for a single day.

Power sector companies had told the apex court that RBI has come up with a ‘one size fits all’ and are not focussing on the remedial process.

While other companies had told the apex court that Inter-Creditor Agreement (ICA) among banks as a doable repayment resolution mechanism has failed to set off as the relevant institutions like LIC, HUDCO, IIFCL, IFCI, SIDBI, NIACL, GIC are not guaranteeing it.

—India Legal Bureau