Supreme Court order on NPAs: Power firms body heaves a sigh of relief, says ruling will give flexibility to restructure debt


Mumbai: Welcoming the Supreme Court docket docket ruling quashing the RBI spherical on the choice of burdened belongings, the Affiliation of Power Producers Tuesday acknowledged it may give some breather and suppleness to restructure their debt.

The apex courtroom quashed the RBI spherical of 12 February, 2018, that made it compulsory for banks to acknowledge even a one-day default by the debtors and resolve the problem in 180 days failing which such accounts must be referred to NCLTs for determination for a giant account of Rs 2,000 crore and above.

“The circular had outlined impractical conditions and timelines for resolution and also had an inbuilt bias against the existing owners of stressed projects,” APP director- regular Ashok Khurana acknowledged in an announcement.

He further acknowledged with the order, burdened vitality companies and the lenders can have some respiration home along with flexibility to restructure cash owed in a style that
ensures continuity and value maximization for lenders along with for debtors.

Supreme Court order on NPAs: Power firms body heaves a sigh of relief, says ruling will give flexibility to restructure debt

Guide image. Reuters.

This moreover offers the much-needed help to vitality companies like RattanIndia, GMR, GVK, IL&FS and Coastal Energen amongst others which had been taken to NCLTs beneath the RBI spherical, he acknowledged.

The order, handed out by a bench headed by justice RF Nariman acknowledged, “we declare the RBI circular ultra vires.” The small print of the order are awaited.

The RBI’s spherical led 34 vitality producers to tug the regulator first to the Allahabad Extreme Court docket docket, which requested RBI to produce some respite, nevertheless the RBI did not budge and challenged it inside the Supreme Court docket docket last yr.

Residence rating firm Icra had estimated the complete debt impacted on account of February 12 spherical at spherical Rs 3.eight lakh crore all through 70 large debtors, of which Rs 2 lakh crore all through 34 debtors had been inside the vitality sector.

The corporate had moreover acknowledged 92 p.c of this debt had been labeled as NPAs by banks as of March 2018 and likewise made provisions of over 25-40 p.c on these accounts.

The affiliation, by way of a variety of representations to RBI and completely different authorities, had highlighted how the impugned spherical did not bear in mind actual difficulties confronted by the builders and the underlying causes of stress.

Khurana acknowledged APP had moreover highlighted the spherical would not help each the builders or the lenders or the sector at large, and in its place it’d end in vital
erosion of price as a result of the belongings had been burdened ensuing from parts which is likely to be confronted even by new promoters, in case of change in possession as fallout of the impugned spherical.

“The choice along with newest CCEA and union vitality and commerce ministries’ notifications implementing the ideas of the empowered committee will current the
much- needed respite to the entire affected occasions and alleviate their stress,” Khurana acknowledged.

Within the meantime, reacting to the apex courtroom order, JSW group CFO Seshagiri Rao acknowledged the order simply is not life changer for defaulters or banks.

“The judgement simply is not going to make a whole lot of a distinction as a result of the courtroom has solely questioned the RBI’s powers to cross such regular directions as a result of the regulator nonetheless
continues to have the powers to direct banks to take the companies to IBC particularly circumstances, which has not been reversed,” Rao knowledgeable PTI.

The courtroom moreover has not requested banks to ignore a default, he acknowledged, and recognized that if any monetary establishment or financial creditor can nonetheless take a corporation to IBC.

“The circular says if there is one-day default then from that day the banks have to find a resolution within 180 days failing which they have to refer it to IBC. I, therefore, don’t think this order is not a life changer,” Rao added.

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