The Madras High Court on Monday gave temporary impunity to RKM Powergen’s 1,440 MW stressed power unit at Chhattisgarh from any action under the Reserve Bank of India’s February circular that seeks to fast-track insolvency process for defaulting projects.
The Madras High Court on Monday gave temporary impunity to RKM Powergen’s 1,440 MW stressed power unit at Chhattisgarh from any action under the Reserve Bank of India’s February circular that seeks to fast-track insolvency process for defaulting projects. The day, however, also saw four firms — Essar Power, GMR Energy, KSK Energy and Rattan India Power — withdrawing their petitions from the Allahabad High Court, seeking similar relief; these companies may now join a group of firms that had approached the Supreme Court earlier, seeking joint hearing of their cases of similar import. The apex court is slated to hear the matter on Tuesday.
The RBI circular requires lenders to file insolvency petitions against several stressed power units before the National Company Law Tribunal (NCLT) by Tuesday. The Allahabad HC had on August 27 refused to set aside the circular.
The Allahabad HC said the Centre may direct the RBI for a special dispensation for the sector. A large chunk of the 34 projects — with a combined capacity of about 39 gigawatts and banks’ exposure of Rs 1.75 lakh crore — are now set to take the insolvency route. Analysts estimate resolution under this process could result in hefty haircuts of up to 70% for banks.
An earlier bid by State Bank of India (SBI) to undertake loan recast of some of these projects under the so-called Samadhan scheme had failed as the lenders could not reach a consensus. As a result, these projects with partial power purchase agreements and fuel linkages could also enter the insolvency arena.
Sources said that RKM’s case is scheduled to be heard by the Madras HC on September 24. A senior official from one of the companies told FE that it decided to pull out from the proceedings as the Allahabad HC wanted all the lenders to be present in the subsequent hearings, which would have delayed the whole process.
Earlier, the RBI had sought the transfer of all the insolvency cases pending before the high courts of Delhi, Allahabad and Madras to the SC on the grounds that there is a likelihood of conflict of decisions if the petitions are decided independently and that would lead to “confusion and uncertainty for lenders, borrowers, defaulters and other involved parties”. SBI chairman Rajnish Kumar told a TV channel over the weekend that about Rs 17,000 crore of power non-performing assets with SBI were heading to the NCLTs.