Insolvency cases: RBI’s Mundra says firms free to move higher courts
RBI’s Mundra says freedom of speech is a fundamental right and approaching the judiciary is open to everyone including stressed firms challenging bankruptcy proceedings
Mumbai: With some large stressed firms challenging the Reserve bank of India’s (RBI) directives to banks to initiate proceedings against them under the Insolvency and Bankruptcy Code (IBC) in high courts, RBI deputy governor SS Mundra on Thursday said nobody can be prevented from approaching the judiciary.
Last week, the Gujarat High Court had dismissed Essar Steel’s plea against RBI to start insolvency proceedings against it. The court refused to grant any relief to the steel major on proceedings initiated against it by the State Bank of India and Standard Chartered Bank at National Company Law Tribunal (NCLT) under the IBC, indicating that all issues raised by the company should be considered by the NCLT.
“Freedom of speech is a fundamental right and approaching the higher judiciary is open to everyone,” Mundra told reporters on the sidelines of a Canara Bank function. “If an individual company chooses to use that route, I don’t think that can be prevented, but I am sure that in any judicial system past pronouncements create a kind of future direction and that direction has now become evidently clear,” he said.
Essar Steel had moved the high court seeking the court’s direction to quash and set aside RBI’s direction to the banks to initiate insolvency proceedings against the company through a release dated 13 June. The RBI had last month identified 12 accounts (companies) for insolvency proceedings with each of them having over Rs5,000 crore of outstanding loans, accounting for 25% of the total non-performing assets (NPAs) of banks.
The steel company’s debt has increased to over Rs42,000 crore. Essar’s contention was that this directive was unfair as it was in an advanced stage of restructuring its loans. The Gujarat High Court had also rapped the RBI for its statement in which it had said that the NCLT will take up on a priority basis the insolvency proceedings against companies having high debt.
“The RBI has to be careful while issuing press releases, it must be in consonance with the Constitutional mandate, based on sound principles of law, but in any case should not be in the form of advice, guidelines or directions to judicial or quasi-judicial authorities in any manner what so ever,” the court had said in its order.
Mundra said it was an unintended interpretation (on the part of RBI) and that the Reserve Bank has done the required modification. “I don’t think RBI had ever intended to direct the judiciary as to what should be their priority,” he said. He also said that RBI is looking at the provisioning norms for the cases that have been or will be referred to IBC for resolution.
“That’s something where the mind is being applied now and as you see in this entire process, RBI’s been doing timely communication, so wait for that,” Mundra said. The RBI has asked banks to make a provision of up to 50% for the accounts for which insolvency proceedings have been initiated and make 100% for those face liquidation.
- Cabinet reduces ONGC’s burden of levies in pre-NELP oil blocks
- Thailand’s CP Group-owned Lots Wholesale opens its flagship India store in Delhi
- Amazon Prime Day evolves from rummage sale to must-shop event
- Amazon, Flipkart sale: Beware of fake WhatsApp alerts
- Flipkart offers mobile recharge, flight ticket bookings
Editor's Picks »
- Lok Sabha passes bill allowing detention of children in Classes V-VIII who fail in exams
- Mega drinking water project in Telangana may be ready by October
- 25% central funding for Maharashtra irrigation projects
- The many sticking points in the Naga peace process
- Why politicians fail to focus on long-term policies
- Fund managers slashing allocations to equities in emerging markets, shows BAML survey
- ICICI Lombard tightens grip on profitability in a lean growth quarter
- TCNS Clothing IPO: Valuations capture the upsides adequately
- Nightmare of Indian Accounting Standard 115 comes to haunt firms in the real estate sector
- What is driving the optimism in stocks of paint companies?