Power Producers vs RBI: Banks Can Initiate Insolvency Proceedings, Say Experts


Power Producers vs RBI: Banks Can Initiate Insolvency Proceedings, Say Experts

The Supreme Court’s oral order on Tuesday this week in the private power producers case led to conflicting views among experts. The written order, which was made available a day later, clarifies the situation on whether lenders can initiate insolvency proceedings against power producers, experts told BloombergQuint.

Power companies had challenged the validity of the Reserve Bank of India’s Feb. 12 circular in various high courts. The circular directs banks to file insolvency and bankruptcy proceedings against all large loan accounts above Rs 2,000 crore if a resolution plan is not agreed upon in 180 days.

The Allahabad High Court, while hearing the matter of several power producers, declined to grant their plea for a stay on the circular. A similar challenge was mounted by the Shipyards Association of India and the South Indian Sugar Mills Association before the Gujarat and Madras High Courts, respectively. Since several high courts were hearing cases on the same issue, the RBI filed a transfer petition before the Supreme Court. Read More

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