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SC to begin hearing on RBI's circular on insolvency proceedings
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SME Times News Bureau | 17 Nov, 2018
The Supreme court on Friday said it would commence from November 28
hearing on a batch of petitions contesting February 12, 2018, Reserve
Bank of India 's circular spelling revised framework for initiation of
insolvency proceedings against defaulting companies without any delay.
The
bench of Justice Rohinton Fali Nariman and Justice Navin Sinha said the
hearing on a batch of petitions by companies belonging to power, sugar
textile, I.T., Shipping and other sectors would commence on November 28.
The
top court had on September 11 asked the banks to maintain status quo
and hold their hands from initiating any insolvency proceedings under
the revised RBI framework.
Asking all the parties to complete
their paper work before the final hearing on November 28, Justice
Nariman said they will not entertain any plea for adjournments.
The
RBI had brought the revised framework for speedy resolution of
non-performing assets (NPAs), or bad loans, by harmonising existing
guidelines with the norms specified in the Insolvency and Bankruptcy
Code (IBC), 2016.
Under the revised framework, banks were
required to identify initial stress in loan accounts, immediately on
default, by classifying stressed assets as special mentionA accounts
(SMA) depending upon the period of default.
The central bank had
said that all lenders would be required to put in place Board-approved
policies for resolution of stressed assets, including timelines for
resolution.
"As soon as there is a default in the borrower
entity's account with any lender, all lenders - singly or jointly -
shall initiate steps to cure the default," the notification had said.
On
the implementation of the resolution plan, the RBI had said: "The
resolution plan (RP) may involve any actions/plans/reorganisation
including, but not limited to, regularisation of the account by payment
of all over dues by the borrower entity, sale of the exposures to other
entities/investors, change in ownership, or restructuring."
The revised guidelines had also laid down the timelines for resolution of stressed assets.
If
a resolution plan in respect of large accounts is not implemented as
per the timelines specified, lenders were required to file insolvency
applications, singly or jointly, under the IBC within 15 days from the
expiry of the specified timeline, said the revised framework.
Besides,
all lenders were required to submit a Central Repository of Information
on Large Credits (CRILC) on all borrower entities in default with
aggregate exposure of Rs 5 crore and above.
The notification had
said all accounts, including those where any of the schemes have been
invoked but not yet implemented, would be governed by the revised
framework.
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