Case: Jayaswal Neco Industries Limited, Through Its Authorized Representative & Another Vs. Reserve Bank of India, Through Its Chief General Manager ?? In Charge, Department of Banking Regulations & Others

R.M. Borde, J.1. Petitioner No.1Jayaswal Neco Industries Limited (JNIL) is a public limited company incorporated under the Companies Act, 1956, having its registered office at Nagpur.2. The challenge raised in the instant Petition is in respect of the action of the Reserve Bank of India (RBI)Respondent No.1 herein, of( a) retrospectively applying the internal communications dated 29 September 2017 and 30 November 2017; (b) stalling the implementation of final executed Master Restructuring Agreement (MRA) dated 12 December 2017, executed by 10 out of 12 lenders (which corresponds to approximately 91% of creditors by value); (c) failing to consider or respond to Petitioner No.1s representations dated 15 December 2017, 16 December 2017, 22 December 2017 and 26 December 2017 and; (d) not considering and discrediting the credit opinion obtained from SMERA, which is one of the accredited Credit Rating Agency (CRA), in terms of its circular dated 13 June 2017 and directing Respondent No.2State Bank of India (SBI) to appoint third CRA i.e. India Ratings and Research Private Limited (IRRPL) on 7 December 2017, for the purpose of obtaining fresh credit rating by Respondent No.2SBI, knowing well that the deadline is 13 December 2017. The Petitioner has also prayed for grant of interim relief, restraining Respondent Nos. 2 to 13 from initiating or prosecuting any proceedings against Petitioner No.1JNIL under the Insolvency and Bankruptcy Code, 2016 (IBC) before the National Company Law Tribunal, Mumbai, pursuant to the directives issued by the RBI.3. The Petitioner company has a large quantum of stressed assets and it was classified as Nonperforming Assets (NPA) w.e.f 31 January 2015. The RBI has released the framework for a revitalizing distressed assets in the economy. The framework outlined the steps towards the early recognition of the financial distress, steps for resolution and fair recovery for lenders.4. The RBI issued detailed guidelines for formation of Joint Lenders Forum (JLF) and adoption of Corrective Action Plan (CAP) for operationalizing the framework. The JLF guidelines also prescribed that the lenders can formulate and sign an agreement, which may be called JLF Agreement, incorporating the broad rules for functioning of JLF. It also prescribed that, while JLF formation and subsequent corrective actions will be mandatory in the accounts, having aggregate exposure of Rs.1000 millions and above, in the other cases also the lenders will have to monitor the asset quality closely and take corrective action for effective resolution as deemed appropriate. The JLF is expected to explore various options to resolve the stress in the account. There are various options under the CAP by the JLF, such as rectification, restructuring, recovery etc.5. In the case of Petitioner company, the JLF held first meeting on 17 March 2017 wherein, it was decided and agreed to hold back NCLT proceedings till April 2017. In the meeting of JLF held on 7 September 2017, the debt resolution (restructuring scheme) of the Petitioner No.1JNIL was approved with supermajority.6. As per the directions issued by the RBI on 28 August 2017, any resolution plan finalized out side IBC, it will be subject to the rating requirement i.e. the residual debt must be rated as an investment grade by two external CRAs accredited by the RBI. The RBI, in its circular dated 13 June 2017, prescribed time limit of six months for finalizing the resolution plan out side the IBC. It is specified in para 4 of the circular that -4. As regards the other nonperforming accounts which do not qualify under the above criteria, the IAC (Internal Advisory Committee) recommended that banks should finalize a resolution plan within six months. In cases where a viable resolution plan is not agreed upon within six months, banks should be required to file for insolvency proceedings under the IBC."7. The SBI, having regard to the deadline of 13 December 2017 as prescribed by the RBI in its circular dated 13 June 2017, appointed two accredited CRAs i.e. CARE and SMERA on 21 September 2017 and 28 September 2017.8. The RBI issued directions on 29 September 2017 and decided that it would assign two CRAs for each proposal and make payment to such CRAs. In paragraph Nos. 2 and 3 of the circular dated 29 September 2017, it is recorded thus -2. Specifically, it was advised that any resolution plan finalized outside Insolvency and Bankruptcy Code, 2016 (IBC), in respect of the accounts mentioned in the letter dated August 28, 2017 will be subject to a rating requirement i.e., in all resolution plans where the lenders continue to hold a portion of the debt, the residual debt must be rated as investment grade by two external credit rating agencies (CRAs) accredited by the Reserve Bank for bank loan ratings.3. In this context, it is further advised that the assignment of CRAs for the resolution plans, and the payments to the CRAs for the same, will be made by the Reserve Bank of India. The lead bank should forward the list of the accounts for which resolution plans outside IBC are being considered, along with the number of such proposals being considered/received for each account. The Reserve Bank will accordingly assign two CRAs for each proposal.9. It is the contention of the Petitioner that before issuance of directions by the RBI, the SBI on behalf of JLF had already appointed CRAs and the work had also commenced. The SBI tendered two representations to RBI on 17 October 2017 and 6 December 2017 bringing the fact of appointment of two CRAs i.e. CARE and SMERA to the notice of RBI and sought ratification of appointment of two CRAs made by it. It is the contention of the Petitioner that the RBI did not instruct the bank, not to proceed with the appointment or forthwith discontinue the same or wait for the appointment of two CRAs to be made by the RBI. The Petitioner contends that the appointment of the CRAs was made correctly by the SBI, from amongst the final accredited CRAs, approved by the RBI. The RBI, on the contrary, on 7 December 2017, confirmed the credit opinion obtained from CARE and directed the SBI to obtain a fresh rating from IRRPL. SMERA has assigned long term rating of BBB and short term rating as A3 respectively to the continued debt (residual debt) of the Petitioner No.1, which signify moderate safety. The JLF, in its meeting dated 16 October 2017, decided that the lead bank should approach on behalf of the JLF to Respondent No.1 and get ratification of the appointment of CRAs. The CRA, CARE on 14 November 2017 assigned BBB credit rating in respect of residual debt of Petitioner No.1 signifying moderate degree of safety.10. In the meeting of the JLF dated 12 December 2017, the issues relating to the RBI dispensation were discussed. The note of RBI notification dated 29 September 2017, was taken whereunder it was advised that assignment of CRAs for the resolution plans and the payments to CRAs for the same, will be made by the RBI. It was decided that the SBI had already approached the RBI for approval of action of appointment of CARE and SMERA vide letters dated 17 October 2017 and 6 December 2017 and the matter is being followed up and the decision of RBI is awaited. The issue of special dispensation of staggered promoters contribution of Rs.15.00 crores upfront and remaining Rs. 85.29 crores from sale of Neco Ceramics land before March 2019, as per restructuring plan was discussed. The lenders forum agreed for minimum upfront requirement of promoters contribution of Rs.100.29 crores in the form of part cash of Rs.58.00 crores and the remaining part from conversion of existing unsecured loan into equity. It is recorded in the minutes of the meeting that the RBI in its communication to SBI on 30 November 2017, has informed that in terms of their earlier letter dated 28 August 2017, the resolution plan in respect of identified entities need to be finalized and implemented by 13 December 2017. In this context, the plan shall be considered, finalized and implemented if the following milestones are met before the deadline of 13 December 2017( i) the required credit opinions (ICE) for the resolution plans are available from two CRAs. (ii) the Master Restructuring Agreement (MRA) has been signed by all the parties and; (iii) all the preconditions specified in the respective RBI guidelines, relating to the specific resolution scheme being adopted have been complied before the deadline. In case of generic restructuring, these will include the requirements relating to the promoters contribution to be brought upfront and personal guarantees to be provided by the promoters.11. The status of MRA was also discussed. The forum confirmed that 10 out of 12 lenders of the company barring Oriental Bank of Commerce and IDBI Bank Limited with around 92% of the value had sanctioned restructuring scheme. After seeking information from Lender Legal Council (LLC), that the MRA could be signed in the absence of sanction from 2 member banks. The MRA was executed by ten lenders, except IDBI Bank Ltd. and Oriental Bank of Commerce and the company representative and was handed over to the SBI.12. According to the Petitioner, how the conditions having been met before the deadline of 13 December 2017, there is no other option to the RBI except to allow the JLF to implement MRA. The three conditions namely, the promoters contribution to the satisfaction of JLF has been brought in and the satisfaction of JLF cannot be substituted by any other entity, including RBI or the Court. It is contended that MRA has already been implemented and as such, there is no need to approach the IBC and thirdly, the CRAs have certified the residuary debt of the Petitioner company as investment grade and as such, the relief as prayed for by the Petitioner, deserves to be granted.13. The contentions raised by the Petitioner in the Petition have been controverted by the Respondent-RBI and it is vehemently contended that the MRA has not been implemented and that the Petitioner has failed to comply with all the conditionalities i.e. (i) bringing in upfront contribution by the promoters, (ii) the credit ratings of accredited CRAs, that the residuary debt of the company is of investment grade (iii) the CRA appointed by the RBI i.e. IRRPL has recorded the creditworthiness as "low safety regarding timely servicing of financial obligations. Since the scheme has not been implemented, in view of the policy prescribed by the RBI on 12 February 2018, there cannot be any implementation of any MRA outside the IBC. In view of Promulgation of Banking Regulation (Amendment) Ordinance 2017, on 4 May 2017, Sections 35AA and 35AB, are inserted in Banking Regulation Act, 1949, which read thus 35AA. The Central Government may by order authorize the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016.Explanation: - For the purposes of this section default has the same meaning assigned to it in Clause 12 of Section 3 of the Insolvency and Bankruptcy Code, 2016. 35AB. (1) Without prejudice to the provisions of section 35A, the Reserve Bank may, from time to time, issue directions to the banking companies for resolution of stressed assets. (2) The Reserve Bank may specify one or more authorities or committees with such members as the Reserve Bank may appoint or approve for appointment to advise banking companies on resolution of stressed assets.14. The RBI on 5 May 2017, issued circular instructing the lenders to scrupulously adhere to the timeline prescribed in the circular to facilitate the timely decision making. It is prescribed in the circular that henceforth the decision agreed upon by minimum 60% of creditors by value and 50% of the creditors by number in JLF, would be considered as the basis for deciding the CAP and will be binding on all lenders, subject to exit (by substitution) option available in the framework.15. The RBI, on 22 May 2017, issued a press release setting out the action plan to implement the Banking Regulation (Amendment) Ordinance, 2017. The changes that were brought about to the existing regulations dealing with the stressed assets were - (i) with a view to facilitating decision making in JLF, consent required for approval of proposal was changed to 60% by value instead of 75%, while keeping the number at 50%; (ii) the banks who were in minority on the proposal approved by JLF are required to either exit by complying with the substitution rules within the stipulated time or adhere to the decision of the JLF; (iii) participating banks have been mandated to implement the decision of JLF without any additional conditionality; (iv) the Boards of the bank were advised to empower their executives to implement JLF decisions without further reference to them. In respect of CRAs, with a view to prevent rating-shopping or any conflict of interest, the RBI stated that it is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of the contribution from the banks and the Reserve Bank.16. In a corrigendum issued to the earlier press release dated 12 May 2017, the RBI declared on 13 June 2017 that the IAC recommended that the banks should finalize a resolution plan within six months and in cases where a viable resolution plan is not agreed upon within six months, the banks should be required to file insolvency proceedings under the IBC. It is contended that since the resolution plan has not been finalized and implemented, the RBI directed the SBI to file insolvency proceeding under the IBC and those have already been presented. The timeline as per the directives of RBI was thus, 13 December 2017. In a circular dated 29 September 2017, the RBI issued directions under Section 35AA to the SBI in furtherance of its letter dated 28 August 2017 stating that, any resolution plan finalized outside Insolvency and Bankruptcy Code 2016, in respect of the accounts mentioned in the letter dated 28 August 2017, will be subject to a rating requirement i.e. in all resolution plans where the lenders continue to hold a portion of the debt, the residual debt must be rated as investment grade by two external CRAs, accredited by the RBI for bank loan ratings. It is further informed that the assignment of CRAs for the resolution plans and the payments to the CRAs, will be made by the RBI. The RBI, as such, assigned third CRA, which has reported the credit rating of the Petitioner-company to be adverse. The Petitioner contends that the decision by the RBI to assign the job of credit rating to the agency appointed by the RBI, was after the SBI entered into an agreement with SMERA and as such, the decision of RBI cannot be operated retrospectively. It is also contended that it is intriguing as to how the RBI accepts the credit rating by CARE whereas, doubt the rating by SMERA, though the said agency is accredited by the RBI. The request of SBI for ratification of appointment of CARE and SMERA made on 16 October 2017, has not been accepted by the RBI. The request made by the SBI for grant of dispensation in respect of promoters contribution of Rs.15.00 crore as upfront and balance Rs.85.29 crores latest by 31 March 2019, has also not been accepted by the RBI. The RBI on 14 November 2017, communicated the SBI that on careful examination of the request made, the RBI regretted and express inability to accede to the request in respect of granting dispensation. On 30 November 2017, the Petitioner expressed willingness to contribute in the form of share application money. However, the infusion of the contribution was also not before the deadline prescribed by the RBI, since the infusion of amount of share money was subject to the approval by the Board. On 6 December, 2017, the SBI wrote to the RBI informing that the bank has already assigned the residual rating to the CARE and SMERA in accordance with the decision of the Core Committee of Lenders. The CRAs have accorded investment grade rating of BBBto the residual debt of the company. It was requested to permit to have rating from CARE and SMERA. It is further recorded that the promoters of the company have now agreed to bring in promoters contribution upfront in the form of cash, conversion of unsecured loan brought by the promoters or transferring equity of the company by promoters to the lenders to compensate for their sacrifice as per extent RBI guidelines. The restructuring process involves conversion of debt into equity which requires approval from the Companys Board approval from shareholders, which requires 21 days prior notice and in principal approval from BSE/NSE. The approval process involves time period of 45 days to 60 days. It was therefore, requested to grant extension of time limit till 31 January 2018 for implementation of restructuring package out side IBC. It is thus, clear that the promoters did not bring in their contribution within prescribed time limit nor the restructuring package outside the IBC was implemented. The RBI on 7 December 2017, informed the SBI that all the required conditions must be fully met by 13 December 2017, failing which the bank should initiate insolvency proceedings against the identified company by 31 December 2017. The RBI issued a circular providing for a completely revised framework of resolution of stressed assets and disbanding the JLF as an institution. The earlier circular has been interalia repealed. Paragraphs 18 and 19 of the circular record thus -18. The extent instructions on resolution of stressed assets such as Framework for Revitalising Distressed Assets, Corporate Debt Restructuring Scheme, Flexible Structuring of Existing Long Term Project Loans, Strategic Debt Restructuring Scheme (SDR), Change in Ownership outside SDR, and Scheme for Sustainable Structuring of Stressed Assets (S4A) stand withdrawn with immediate effect. Accordingly, the Joint Lenders Forum (JLF) as an institutional mechanism for resolution of stressed accounts also stands discontinued. All accounts, including such accounts where any of the schemes have been invoked but not yet implemented, shall be governed by the revised framework.19. The list of circulars/directions guidelines subsumed in this circular and thereby stand repealed from the date of this circular is given in Annex-3.17. The policy framed earlier by the RBI, in respect of the resolution of stressed assets, has been completely revised. It is the contention of the Petitioner that since the MRA has been implemented, the revised policy guidelines dated 12 February 2018, would not apply. The contentions raised by the Petitioners are devoid of substance. All the three conditionalities prescribed by the RBI have not been fulfilled by the Petitioners, those are - (i) the required credit opinions (ICE) for the resolution plans available from two CRAs. It must be noted that the CRAs appointed by the RBI, in terms of its policy has not certified residual debt of the company to be investment grade. The RBI has not accepted the credit rating by SMERA. The decision of the RBI, which is a Banking Regulatory Authority having expertise, cannot be a matter of review under the writ jurisdiction, firstly because the decision making process involves a specialized expertise and secondly, the satisfaction arrived at by the regulatory bank, need not be substituted by the opinion of the Court (ii) the MRA has admittedly been not signed by all the parties. It is the contention of the Petitioner that since the creditors more than 92% in value and more than 50% in numbers have signed the MRA, the same shall be accepted. The directives issued by the RBI prescribe that MRA shall be signed by all the parties. In the instant matter, two lending banks have admittedly not signed the MRA. In the event, any bank refuses to sign, must exit in accordance with the policy. In the instant matter, two non-signing lending banks have not exited in accordance with the procedure. The contention of petitioners that the non-signing banks have voted in favour of the CAP in the meeting of JLF, in itself does not amount to compliance of the directives of the RBI. (iii) the third and most important requirements relating to bringing promoters contribution upfront and personal guarantees to be provided by the promoters, has not been complied with by the Petitioners. It is a matter of record that the Petitioner upfront contribution was only to the extent of Rs.15 Crores out of Rs.100 crores. The Petitioner did not bring in, the promoters contribution before the deadline prescribed by the RBI i.e. before 13 December 2017. The minutes of the meeting of the JLF held on 12 December 2017, clearly record that the promoters contribution was not complete, even as late as, 12 December 2017, the conversion of Rs.42.38 crores of unsecured debt of the promoters to the equity, was only agreed as on such date and was not implemented. Thus, the Petitioner has failed to fulfill the precondition of bringing in promoters contribution to finalize the resolution plan by 13 December 17. It is vehemently contended by the Petitioner that the restructuring package has not been implemented. It shall be noted that by virtue of Clause 24.2(i) of Circular dated 25 February 2016, all the restructuring packages will be required to be implemented in a time bound manner and within 90 days from the date of the approval. In Para 3 of the letter dated 28 August 2017 of the RBI informs that, in the event a viable resolution plan is not finalized and implemented before 13 December 2017, insolvency proceedings under the provisions of IBC may be initiated before 31 December 2017 unless already initiated. In the instant matter, on 12 December 2017, the MRA was signed by 10 out of 12 lenders for implementing the debt restructuring scheme. The remaining two lenders did not exercise their right to exit in accordance with circular dated 25 February 2016. The restructuring package has not come into operation much less, it has not been implemented.18. As has been recorded above, the three required essentials - (i) the required credit opinions for the resolution plans are available from two CRAs; (ii) the master restructuring agreement signed by all the parties and; (iii) the requirements relating to the promoters contribution to be brought upfront and personal guarantees to be provided by the promoters, have not at all been fulfilled and in view of above, the requirement in respect of the implementation of the resolution plans has not been fulfilled. The insolvency proceedings have already been initiated by the SBI in terms of the directives issued by the RBI.19. It is contended on behalf of the Respondent-RBI that, the function of the Court is to see that lawful authority is not abused but not to appropriate to itself the task entrusted to that authority. It is well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters, even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts. (Peerless General Finance and Investment Co. Limited & Anr. Vs. Reserve Bank of India (1992) 2 SCC 343 ). It would also be useful to record the observations in paragraph Nos. 37 and 38, which are as under 37. In Shri Sitaram Sugar Company Limited Vs. Union of India with U.P. State Sugar Corporation Ltd. Vs. Union of India [1990] 3 SCC 223 this Court observed as under: (SCC pp. 25556, para 57)Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the "feel of expert" by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land.38. In R.K. Garg Vs. Union of India (1981) 4 SCC 675 , 690:1982 SCC (Tax) 30 a Constitution Bench of this Court observed as under: (SCC pp. 69091, para 8)Another rule of equal importance is that laws relating to economic activities should be viewed with greater latitude than laws touching civil rights such as freedom of speech, religion etc. It has been said by no less a person than Holmes, J. that the legislature should be allowed some play in the joints, because it has to deal with complex problems which do not admit of solution through any doctrinaire or straitjacket formula and this is particularly true in case of legislation dealing with economic matters, where, having regard to the nature of the problems required to be dealt with, greater play in the joints has to be allowed to the legislature. The Court should feel more inclined to give judicial deference to legislative judgment in the field of economic regulation than in other areas where fundamental human rights are involved. Nowhere has this admonition been more felicitously expressed than in Morey v. Doud (354 US 457 : 1 L Ed 2d 1485 (1957) where Frankfurter, J. said in his inimitable style:In the utilities, tax and economic regulation cases, there are good reasons for judicial self-restraint if not judicial deference to legislative Judgment. The legislature after all has the affirmative responsibility. The courts have only the power to destroy, not to reconstruct. When these are added to the complexity of economic regulation, the uncertainty, the liability to error the bewildering conflict of the experts, and the number of times the judges have been overruled by events selflimitation can be seen to be the path to judicial wisdom and institutional prestige and stability.20. The principles laid down in the matter of Peerless General Finance and Investment Co. Limited & Anr.(Supra) have been reiterated by the Supreme Court in Balco Employees Union (Regd.) Vs. Union of India & Ors . (2002) 2 SCC 333 ).21. There cannot be disagreement as regards the object of JLF in making efforts to execute MRA, is to ensure a resolution and restructuring of the corporate debt. The process of resolution is also provided under ChapterII of the Insolvency and Bankruptcy Code, 2016. The corporate debtor or a financial creditor or an operational creditor can initiate corporate resolution process in view of Sections 6 and 7 of the IBC. An operational creditor may also approach for insolvency resolution under Section 8 of the IBC. There is a time limit prescribed for insolvency resolution process, so also a declaration of moratorium and public announcement is provided under Sections 13 and 14 of the IBC. During the pendency of the insolvency resolution proceedings, in order to manage the affairs of the corporate debtor interim resolution professionals can be appointed, who are expected to manage the assets, finances and operation of the corporate debtor, in a professional manner. Section 20 of the IBC provides that the interim resolution professional shall make an endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. The interim resolution professionals are also empowered to constitute a committee of creditors after collation of all claims received against the corporate debtor and on determination of the financial position of the corporate debtor in view of Section 21 of the IBC. The committee of creditors is empowered to appoint the resolution professionals under Section 22 of the IBC. The resolution professionals are required to conduct corporate insolvency resolution process, in view of Section 23 of the IBC. The duties of the resolution professionals are provided for under Section 25 of the IBC. The submissions of the resolution plan and the approval thereof is provided under Sections 30 and 31 of the Code.22. In view of the provisions of the IBC, the very object of formation of the JLF and the execution of MRA by almost all the majority members and stakeholders of the JLF, can be taken care of, even under the proceedings initiated before the adjudicating authority. The instant petition is presented by the Corporate, objecting to the directions issued by the RBI to the SBI, which is a lead member of the JLF. The JLF is the forum of the creditors of Petitioner Company. It is the JLF, which had conducted meetings for arriving at a credit restructuring plan and for preparation of MRA. The CRAs in respect of which, an objection is raised by the Petitioner company were appointed by the JLF and as per the directions of the RBI, the another credit rating company i.e. IRRPL was appointed. It is the JLF, which has arrived at the MRA, which has not yet been operationalized. The directives issued by the RBI are binding on all the members of the JLF. The Petitioner in the instant Petition, is virtually seeking a direction against the JLF not to proceed with the matter before the adjudicating authority under the IBC and to virtually disregard the directives. In fact, those directives issued to the JLF and initiation of proceedings under IBC before the adjudicating authority is a subject matter of grievance by the Petitioner company. It is the Petitioner company, as recorded above, which has not brought in the upfront contribution, mandated under the directives of the RBI and as instructed by JLF. One of the CRAs appointed by the RBI does not find the residual debt of the Petitioner to be investment grade and thirdly, all the lenders have not signed the MRA. Considering these factors, it is difficult to accept the contention of the Petitioner that the MRA has been operationalized. In view of the policy declared by the RBI on 12 February 2018, since the scheme itself has been withdrawn, any direction for implementation and enforcement of the said scheme, cannot be issued. This court cannot be unmindful of the fact that the RBI has withdrawn all the schemes relating to the financial restructuring, by declaring new financial policy on 12 February 2018. The new policy appears to have been declared by RBI for the reason that the NPA, in the Nationalized banks, have touched almost 8 lakhs crores. In the instant matter also, the financial exposure of the Petitioner company is more than Rs.4000 crores, as has been recorded above, the financial policies and the financial matters, falling within the exclusive jurisdiction of the RBI, need not be scrutinized by the Court, since the Court do not possess required expertize in the financial and economic field.

Decision:
0[ds]10. In the meeting of the JLF dated 12 December 2017, the issues relating to the RBI dispensation were discussed. The note of RBI notification dated 29 September 2017, was taken whereunder it was advised that assignment of CRAs for the resolution plans and the payments to CRAs for the same, will be made by the RBI. It was decided that the SBI had already approached the RBI for approval of action of appointment of CARE and SMERA vide letters dated 17 October 2017 and 6 December 2017 and the matter is being followed up and the decision of RBI is awaited. The issue of special dispensation of staggered promoters contribution of Rs.15.00 crores upfront and remaining Rs. 85.29 crores from sale of Neco Ceramics land before March 2019, as per restructuring plan was discussed. The lenders forum agreed for minimum upfront requirement of promoters contribution of Rs.100.29 crores in the form of part cash of Rs.58.00 crores and the remaining part from conversion of existing unsecured loan into equity. It is recorded in the minutes of the meeting that the RBI in its communication to SBI on 30 November 2017, has informed that in terms of their earlier letter dated 28 August 2017, the resolution plan in respect of identified entities need to be finalized and implemented by 13 December 2017. In this context, the plan shall be considered, finalized and implemented if the following milestones are met before the deadline of 13 December 2017( i) the required credit opinions (ICE) for the resolution plans are available from two CRAs. (ii) the Master Restructuring Agreement (MRA) has been signed by all the parties and; (iii) all the preconditions specified in the respective RBI guidelines, relating to the specific resolution scheme being adopted have been complied before the deadline. In case of generic restructuring, these will include the requirements relating to the promoters contribution to be brought upfront and personal guarantees to be provided by the promoters.11. The status of MRA was also discussed. The forum confirmed that 10 out of 12 lenders of the company barring Oriental Bank of Commerce and IDBI Bank Limited with around 92% of the value had sanctioned restructuring scheme. After seeking information from Lender Legal Council (LLC), that the MRA could be signed in the absence of sanction from 2 member banks. The MRA was executed by ten lenders, except IDBI Bank Ltd. and Oriental Bank of Commerce and the company representative and was handed over to the SBI.The RBI on 5 May 2017, issued circular instructing the lenders to scrupulously adhere to the timeline prescribed in the circular to facilitate the timely decision making. It is prescribed in the circular that henceforth the decision agreed upon by minimum 60% of creditors by value and 50% of the creditors by number in JLF, would be considered as the basis for deciding the CAP and will be binding on all lenders, subject to exit (by substitution) option available in the framework.15. The RBI, on 22 May 2017, issued a press release setting out the action plan to implement the Banking Regulation (Amendment) Ordinance, 2017. The changes that were brought about to the existing regulations dealing with the stressed assets were(i) with a view to facilitating decision making in JLF, consent required for approval of proposal was changed to 60% by value instead of 75%, while keeping the number at 50%; (ii) the banks who were in minority on the proposal approved by JLF are required to either exit by complying with the substitution rules within the stipulated time or adhere to the decision of the JLF; (iii) participating banks have been mandated to implement the decision of JLF without any additional conditionality; (iv) the Boards of the bank were advised to empower their executives to implement JLF decisions without further reference to them. In respect of CRAs, with a view to preventor any conflict of interest, the RBI stated that it is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of the contribution from the banks and the Reserve Bank.16. In a corrigendum issued to the earlier press release dated 12 May 2017, the RBI declared on 13 June 2017 that the IAC recommended that the banks should finalize a resolution plan within six months and in cases where a viable resolution plan is not agreed upon within six months, the banks should be required to file insolvency proceedings under the IBC. It is contended that since the resolution plan has not been finalized and implemented, the RBI directed the SBI to file insolvency proceeding under the IBC and those have already been presented. The timeline as per the directives of RBI was thus, 13 December 2017. In a circular dated 29 September 2017, the RBI issued directions under Section 35AA to the SBI in furtherance of its letter dated 28 August 2017 stating that, any resolution plan finalized outside Insolvency and Bankruptcy Code 2016, in respect of the accounts mentioned in the letter dated 28 August 2017, will be subject to a rating requirement i.e. in all resolution plans where the lenders continue to hold a portion of the debt, the residual debt must be rated as investment grade by two external CRAs, accredited by the RBI for bank loan ratings. It is further informed that the assignment of CRAs for the resolution plans and the payments to the CRAs, will be made by the RBI. The RBI, as such, assigned third CRA, which has reported the credit rating of theto be adverse. The Petitioner contends that the decision by the RBI to assign the job of credit rating to the agency appointed by the RBI, was after the SBI entered into an agreement with SMERA and as such, the decision of RBI cannot be operated retrospectively. It is also contended that it is intriguing as to how the RBI accepts the credit rating by CARE whereas, doubt the rating by SMERA, though the said agency is accredited by the RBI. The request of SBI for ratification of appointment of CARE and SMERA made on 16 October 2017, has not been accepted by the RBI. The request made by the SBI for grant of dispensation in respect of promoters contribution of Rs.15.00 crore as upfront and balance Rs.85.29 crores latest by 31 March 2019, has also not been accepted by the RBI. The RBI on 14 November 2017, communicated the SBI that on careful examination of the request made, the RBI regretted and express inability to accede to the request in respect of granting dispensation. On 30 November 2017, the Petitioner expressed willingness to contribute in the form of share application money. However, the infusion of the contribution was also not before the deadline prescribed by the RBI, since the infusion of amount of share money was subject to the approval by the Board. On 6 December, 2017, the SBI wrote to the RBI informing that the bank has already assigned the residual rating to the CARE and SMERA in accordance with the decision of the Core Committee of Lenders. The CRAs have accorded investment grade rating of BBBto the residual debt of the company. It was requested to permit to have rating from CARE and SMERA. It is further recorded that the promoters of the company have now agreed to bring in promoters contribution upfront in the form of cash, conversion of unsecured loan brought by the promoters or transferring equity of the company by promoters to the lenders to compensate for their sacrifice as per extent RBI guidelines. The restructuring process involves conversion of debt into equity which requires approval from the Companys Board approval from shareholders, which requires 21 days prior notice and in principal approval from BSE/NSE. The approval process involves time period of 45 days to 60 days. It was therefore, requested to grant extension of time limit till 31 January 2018 for implementation of restructuring package out side IBC. It is thus, clear that the promoters did not bring in their contribution within prescribed time limit nor the restructuring package outside the IBC was implemented. The RBI on 7 December 2017, informed the SBI that all the required conditions must be fully met by 13 December 2017, failing which the bank should initiate insolvency proceedings against the identified company by 31 December 2017. The RBI issued a circular providing for a completely revised framework of resolution of stressed assets and disbanding the JLF as an institution.The policy framed earlier by the RBI, in respect of the resolution of stressed assets, has been completely revised. It is the contention of the Petitioner that since the MRA has been implemented, the revised policy guidelines dated 12 February 2018, would not apply. The contentions raised by the Petitioners are devoid of substance. All the three conditionalities prescribed by the RBI have not been fulfilled by the Petitioners, those are(i) the required credit opinions (ICE) for the resolution plans available from two CRAs. It must be noted that the CRAs appointed by the RBI, in terms of its policy has not certified residual debt of the company to be investment grade. The RBI has not accepted the credit rating by SMERA. The decision of the RBI, which is a Banking Regulatory Authority having expertise, cannot be a matter of review under the writ jurisdiction, firstly because the decision making process involves a specialized expertise and secondly, the satisfaction arrived at by the regulatory bank, need not be substituted by the opinion of the Court (ii) the MRA has admittedly been not signed by all the parties. It is the contention of the Petitioner that since the creditors more than 92% in value and more than 50% in numbers have signed the MRA, the same shall be accepted. The directives issued by the RBI prescribe that MRA shall be signed by all the parties. In the instant matter, two lending banks have admittedly not signed the MRA. In the event, any bank refuses to sign, must exit in accordance with the policy. In the instant matter, twolending banks have not exited in accordance with the procedure. The contention of petitioners that thebanks have voted in favour of the CAP in the meeting of JLF, in itself does not amount to compliance of the directives of the RBI. (iii) the third and most important requirements relating to bringing promoters contribution upfront and personal guarantees to be provided by the promoters, has not been complied with by the Petitioners. It is a matter of record that the Petitioner upfront contribution was only to the extent of Rs.15 Crores out of Rs.100 crores. The Petitioner did not bring in, the promoters contribution before the deadline prescribed by the RBI i.e. before 13 December 2017. The minutes of the meeting of the JLF held on 12 December 2017, clearly record that the promoters contribution was not complete, even as late as, 12 December 2017, the conversion of Rs.42.38 crores of unsecured debt of the promoters to the equity, was only agreed as on such date and was not implemented. Thus, the Petitioner has failed to fulfill the precondition of bringing in promoters contribution to finalize the resolution plan by 13 December 17. It is vehemently contended by the Petitioner that the restructuring package has not been implemented. It shall be noted that by virtue of Clause 24.2(i) of Circular dated 25 February 2016, all the restructuring packages will be required to be implemented in a time bound manner and within 90 days from the date of the approval. In Para 3 of the letter dated 28 August 2017 of the RBI informs that, in the event a viable resolution plan is not finalized and implemented before 13 December 2017, insolvency proceedings under the provisions of IBC may be initiated before 31 December 2017 unless already initiated. In the instant matter, on 12 December 2017, the MRA was signed by 10 out of 12 lenders for implementing the debt restructuring scheme. The remaining two lenders did not exercise their right to exit in accordance with circular dated 25 February 2016. The restructuring package has not come into operation much less, it has not been implemented.18. As has been recorded above, the three required essentials(i) the required credit opinions for the resolution plans are available from two CRAs; (ii) the master restructuring agreement signed by all the parties and; (iii) the requirements relating to the promoters contribution to be brought upfront and personal guarantees to be provided by the promoters, have not at all been fulfilled and in view of above, the requirement in respect of the implementation of the resolution plans has not been fulfilled. The insolvency proceedings have already been initiated by the SBI in terms of the directives issued by theis well settled that a public body invested with statutory powers must take care not to exceed or abuse its power. It must keep within the limits of authority committed to it. It must act in good faith and it must act reasonably. Courts are not to interfere with economic policy which is the function of experts. It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters, even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts.There cannot be disagreement as regards the object of JLF in making efforts to execute MRA, is to ensure a resolution and restructuring of the corporate debt. The process of resolution is also provided under ChapterII of the Insolvency and Bankruptcy Code, 2016. The corporate debtor or a financial creditor or an operational creditor can initiate corporate resolution process in view of Sections 6 and 7 of the IBC. An operational creditor may also approach for insolvency resolution under Section 8 of the IBC. There is a time limit prescribed for insolvency resolution process, so also a declaration of moratorium and public announcement is provided under Sections 13 and 14 of the IBC. During the pendency of the insolvency resolution proceedings, in order to manage the affairs of the corporate debtor interim resolution professionals can be appointed, who are expected to manage the assets, finances and operation of the corporate debtor, in a professional manner. Section 20 of the IBC provides that the interim resolution professional shall make an endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. The interim resolution professionals are also empowered to constitute a committee of creditors after collation of all claims received against the corporate debtor and on determination of the financial position of the corporate debtor in view of Section 21 of the IBC. The committee of creditors is empowered to appoint the resolution professionals under Section 22 of the IBC. The resolution professionals are required to conduct corporate insolvency resolution process, in view of Section 23 of the IBC. The duties of the resolution professionals are provided for under Section 25 of the IBC. The submissions of the resolution plan and the approval thereof is provided under Sections 30 and 31 of the Code.22. In view of the provisions of the IBC, the very object of formation of the JLF and the execution of MRA by almost all the majority members and stakeholders of the JLF, can be taken care of, even under the proceedings initiated before the adjudicating authority. The instant petition is presented by the Corporate, objecting to the directions issued by the RBI to the SBI, which is a lead member of the JLF. The JLF is the forum of the creditors of Petitioner Company. It is the JLF, which had conducted meetings for arriving at a credit restructuring plan and for preparation of MRA. The CRAs in respect of which, an objection is raised by the Petitioner company were appointed by the JLF and as per the directions of the RBI, the another credit rating company i.e. IRRPL was appointed. It is the JLF, which has arrived at the MRA, which has not yet been operationalized. The directives issued by the RBI are binding on all the members of the JLF. The Petitioner in the instant Petition, is virtually seeking a direction against the JLF not to proceed with the matter before the adjudicating authority under the IBC and to virtually disregard the directives. In fact, those directives issued to the JLF and initiation of proceedings under IBC before the adjudicating authority is a subject matter of grievance by the Petitioner company. It is the Petitioner company, as recorded above, which has not brought in the upfront contribution, mandated under the directives of the RBI and as instructed by JLF. One of the CRAs appointed by the RBI does not find the residual debt of the Petitioner to be investment grade and thirdly, all the lenders have not signed the MRA. Considering these factors, it is difficult to accept the contention of the Petitioner that the MRA has been operationalized. In view of the policy declared by the RBI on 12 February 2018, since the scheme itself has been withdrawn, any direction for implementation and enforcement of the said scheme, cannot be issued. This court cannot be unmindful of the fact that the RBI has withdrawn all the schemes relating to the financial restructuring, by declaring new financial policy on 12 February 2018. The new policy appears to have been declared by RBI for the reason that the NPA, in the Nationalized banks, have touched almost 8 lakhs crores. In the instant matter also, the financial exposure of the Petitioner company is more than Rs.4000 crores, as has been recorded above, the financial policies and the financial matters, falling within the exclusive jurisdiction of the RBI, need not be scrutinized by the Court, since the Court do not possess required expertize in the financial and economic field.