Mumbai: The Supreme Court on Tuesday granted interim relief to stressed power firms, directing lenders to maintain a status quo on the Reserve Bank of India’s circular for banks to resolve these cases within 180 days.
The apex court directed that all pleas filed by the central bank related to the February circular should be transferred to it and it will hear the matter on 11 November.
Several petitioners, including GMR Energy Ltd; RattanIndia Power Ltd, a Punjab-based textile company; Association of Power Producers (APP); Independent Power Producers Association of India; Sugar Manufacturing Association from Tamil Nadu and a shipbuilding association from Gujarat, had intervened in the matter in different courts.
“Supreme Court has granted status quo. Hence, no new petitions can be filed relying on the RBI circular and if any has been filed it cannot move further," said senior advocate Mahesh Agarwal, representing GMR Energy and RattanIndia Power. “It will apply to power producers who were part of the associations including Association of Power Producers, Independent Power Producers Association of India. Some of the associations including a sugar manufacturing association from Tamil Nadu and a shipbuilding association from Gujarat had challenged RBI’s circular and this relief will be extended to them as well."
On 27 August, the Allahabad high court denied relief to these power companies. Consequently, lenders identified around 20 out of 32 stressed assets to be referred to the National Company Law Tribunal. These assets include power projects such as Essar Power, Korba West Power Co. Ltd, Jindal India Thermal Ltd and Sravant Energy Pvt. Ltd.
RBI, through its 12 February circular, asked banks to draft resolution plans for defaulters within 180 days in cases where the exposure is above ₹ 2,000 crore. The central bank also introduced the concept of a one-day default, under which banks have to identify incipient stress when repayments are overdue even by a day.
“13-14GW of assets, which are nearing resolution stage, will be able to get resolved in this time and it also provides adequate time to a high-level empowered committee set up under the chairmanship of cabinet secretary to come up with suitable recommendations regarding the stressed assets," said APP director general Ashok Khurana.
Accounts that are nearing resolution include Prayagraj Power Generation Co., SKS Power Generation (Chhattisgarh) Ltd, GMR Chhattisgarh Energy Ltd, Videocon Oil Ventures Ltd, GMR Rajahmundry Ltd, Jaiprakash Power Ventures Ltd, Jhabua Power Ltd, Ballarpur Industries Ltd, Bombay Rayon Fashions Ltd, Hindusthan National Glass and Industries Ltd and GTL Infrastructure Ltd. Resolutions for these accounts include debt recast, sale of assets and one-time settlements.
“The status quo order will protect power sector companies from insolvency proceedings, which was the immediate threat. It should also give time to these companies and lenders to complete ongoing resolution processes initiated under the RBI circular" said Vishrov Mukerjee, partner at J Sagar Associates.