The Allahabad High Court today issued a temporary injunction against a circular issued by the RBI, which gave borrowers 180 days’ time to clear their dues, beyond which the borrowers faced insolvency proceedings under the IBC.
The grant of injunction against insolvency proceedings, however, is limited to firms belonging to the power sector.
The Independent Power Producers Association of India challenged the RBI circular of 12 February 2018 as being violative of Articles 14 and 19 of the Constitution. It has also challenged the vires of Sections 35AA and 35AB of the Banking Regulation Act.
These provisions were inserted by through an ordinance last year to empower the central government to issue directions to RBI to effectively deal with stressed assets. RTBI has also issued two circulars – one issued on 13 June 2017, which listed 12 large accounts to be proceeded against under IBC, and another issued on 12 February 2018, which said that banks will have to disclose defaults even if the interest repayment is overdue by just one day and have to put a resolution plan in place within 180 days. Read More