Source: https://advocatemmmohan.com/2019/04/02/constitutional-validity-reserve-bank-of-india-rbi-circular-issued-on-12-02-2018-by-which-the-rbi-promulgated-a-revised-framework-for-resolution-of-stressed-assets-there-is-n/
Timestamp: 2019-04-19 07:21:52+00:00

Document:
constitutional validity – Reserve Bank of India [“RBI”] Circular issued on 12.02.2018, by which the RBI promulgated a revised framework for resolution of stressed assets= There is nothing to show that the provisions of Section 45L(3) have been satisfied in issuing the impugned circular. The impugned circular nowhere says that the RBI has had due regard to the conditions in which and the objects for which such institutions have been established, their statutory responsibilities, and the effect the business of such financial institutions is likely to have on trends in the money and capital markets. Further, it is clear that the impugned circular applies to banking and non-banking institutions alike, as banking and non-banking institutions are often in a joint lenders’ forum which jointly lend sums of money to debtors. Such non-banking financial institutions are, therefore, inseparable from banking institutions insofar as the application of the impugned circular is concerned. It is very difficult to segregate the non-banking financial institutions from banks so as to make the circular applicable to them even if it is ultra vires insofar as banks are concerned. For these reasons also, the impugned circular will have to be declared as ultra vires as a whole, and be declared to be of no effect in law. Consequently, all actions taken under the said circular, including actions by which the Insolvency Code has been triggered must fall along with the said circular. As a result, all cases in which debtors have been proceeded against by financial creditors under Section 7 of the Insolvency Code, only because of the operation of the impugned circular will be proceedings which, being faulted at the very inception, are declared to be non-est.
(excluding RRBs) and All India Financial Institutions, unless specified otherwise.
drawing power, whichever is lower, for more than 30 days.
assignments shall be made by the lenders.
as well as non-fund based) envisaged to be held by all the lenders as per the proposed RP.
180 days from the reference date.
days from the date of first such default.
shall be governed by the revised framework.
of this circular is given in Annex – 3.
circular has, in effect, been stayed on and from 11.09.2018.
delayed regulatory response and non-payment of dues by DISCOMs.
look into the NPA problem in the power sector.
Thermal Power Projects were assured supply of 100 per cent coal.
the Supreme Court by a judgment in Manohar Lal Sharma v.
on by the 37th and 40th Parliamentary Standing Committee Reports.
private sector, stressed assets in the public sector amount to nil.
months’ time is required to implement a resolution plan.
the power sector will land in the NCLT.
cent haircut. Thus, there is significant value erosion.
done ignoring the prevailing realities.
disincentivizes restructuring with the existing promoters.
economy or the power sector.
to stressed/non-performing assets in electricity sector.
other essentials required in this regard.
linkage by Coal India Limited (CIL).
NTPC’s own concerned plants/units are commissioned.
subsequent months up to a maximum of three months.
account of States and make payment to the PFIs.
of these may be linked to the plant and not the Promoter.
manifestly arbitrary and violative of Article 14 on this score as well.
RBI to issue directions qua individual defaults that are committed.
Reasons introducing the said Sections by the Amending Act of 2017.
Shri Mukul Rohatgi, Shri Sajan Poovayya, Shri K.V.
infrastructure, sports infrastructure, sugar, fertiliser, shipyard, etc.
place and which consequently require long periods for resolution.
Regulation Act and the RBI Act.
owing should come back into the economy for further productive use.
granted by the circular or through the route of the Insolvency Code.
deal with the problems which affect the national economy as a whole.
Circular cannot be said to be ultra vires.
Preamble as well as other provisions of the Banking Regulation Act.
bring back the power sector on its feet.
constituted and it held its first meeting on June 12, 2017.
500 exposures in the banking system.
criterion for referring accounts for resolution under IBC.
for immediate reference under IBC.
priority by the National Company Law Tribunal (NCLT).
amounted to INR 197,769 crore.
revised framework vide its circular dated 12.02.2018.
banking companies to resolve specific stressed assets.
intervene in specific cases of resolution of nonperforming assets, to bring them to a definite conclusion.
companies for resolution of stressed assets.
on resolution of stressed assets’.
Committees that have been set up in this behalf.
legislation on the ground of such legislation being manifestly arbitrary.
Court in Indian Express Newspapers (Bombay) (P) Ltd.
be said to be manifestly arbitrary.
subordinate authority within the framework of that policy.
nature is ancillary to the statute to subordinate bodies.
of Delhi v. Birla Mills.].
of the Essential Supplies (Temporary Powers) Act, 1946.
gives guidance as to how the banking company will run its business.
plea of constitutional validity fails.
power authorising the RBI to issue the impugned circular.
“always speaking”. Thus, in Senior Electric Inspector v.
political and scientific and other fields of human activity.
the word “telegraph line” in the Act.
There is another preliminary matter to be considered.
used as an imperative only, not as a future”.
not have been imagined by a legislator of those days.
infliction of ‘cruel and unusual punishments’ (section 10).
will be so regarded today.
the highway did not include the removal of ice and snow.
express a broader concept than Parliament intended.
the Banking Regulation Act and not any other statute.
Act. On this score, therefore, Dr. Singhvi’s contention must fail.
Court. He relied, in particular, upon Central Bank of India v.
provincial law in force relating to indebtedness.
stipulations articulated by the best of legal brains.
management of any banking company generally.
companies and issue necessary directions in this behalf.
statutory force and, thus, can be termed as law in force.
administration affecting the public interest.
consultation with the Central Government, and not otherwise.
showing cause against the proposed action.
undertaking of the company in India.
all such rules shall be published in the Official Gazette.
period as may be specified.
resolution process under the Insolvency Code, is thus, important.
it may do so only within the four corners of Section 35AA.
other than the manner set out in Section 35AA.
views that the general power may not include this power.
excursions into the debates of Parliament are permitted.
be construed. The setting and the pattern are important.
copy of its report on such inspection.
RBI has no power to issue directions on its own, unlike Section 35.
This argument also must, therefore, fail.
Sections 35A and 35AA. This Court, in Bharat Sanchar Nigam Ltd.
addition to the power that is given under Section 35A.
exercised separately from the power conferred by Section 35AA.
external aids to construe the statute at hand. In Eera (through Dr.
Singh, (2017) 10 SCC 779 [at paragraph 13].
the only source of power.
then take over and have to be followed.
special provisions in the same legislative instrument.
598], Churchill v. Crease [5 Bing 177], United States v.
Chase [135 US 255] and Carroll v. Greenwich Ins. Co.
as has been done by the impugned circular.
in respect of debtors generally, would be ultra vires Section 35AA.
particular subject; peculiar. 3. exact; giving full details. 4.
particular or defined thing; explicit . 2.
submission of Shri Dwivedi in this behalf.
also does not take Shri Dwivedi very much further.
by it as financial institutions or institution.
rates of interest, on which it is provided.
vires as a whole, and be declared to be of no effect in law.
inception, are declared to be non-est.
and petitions are disposed of accordingly.
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