RBI circular: Gencos to move SC after HC refuses to give relief

By: | Published: August 29, 2018 5:38 AM

Independent Power Producers Association of India (IPPI) is likely to move the Supreme Court on Wednesday, challenging the Allahabad High Court’s order that denied any immediate relief to power companies against the Reserve Bank of India’s (RBI) February 12 circular on bad loans.

“IPPA or APP (Association of Power Producers) are at liberty to apply for urgent interim relief if need so arises, placing the requisite factual details on record,” the HC said while refusing interim relief.

Independent Power Producers Association of India (IPPI) is likely to move the Supreme Court on Wednesday, challenging the Allahabad High Court’s order that denied any immediate relief to power companies against the Reserve Bank of India’s (RBI) February 12 circular on bad loans.

Sources told FE that many power companies are also contemplating moving the SC for a stay on the HC order. Some may also move the HC individually for seeking interim relief, as the HC itself granted them liberty to do so. “IPPA or APP (Association of Power Producers) are at liberty to apply for urgent interim relief if need so arises, placing the requisite factual details on record,” the HC said while refusing interim relief.

The central bank had tightened the norms for settling non-performing assets by allowing lenders to initiate insolvency proceedings against defaulters within 180 days for resolving bad loans. The circular had raised chances of insolvency proceeding being invoked against
34 stressed projects by as early as September.

The deadline for finalising resolution plans for the stressed assets expired on Monday, the day when the HC said that the government can direct the RBI to provide special dispensation to the power sector under the provisions of the Section 7 of the RBI Act. It also directed the high-level committee headed by the Cabinet secretary to address the issue of stressed power assets to come up with a solution in two months in consultation with the RBI. It asked an RBI nominee to be part of the panel.

While the power producers have attributed the crisis in the sector to delayed payments by discoms, irregular coal supply and regulatory delays, the RBI said government policies like preferential treatment to state-owned power utilities like NTPC caused the problems.

The Supreme Court is already hearing the RBI’s plea seeking the transfer and clubbing of all cases challenging its circular that mandates insolvency proceedings for a debt servicing default beyond 180 days.

The RBI wants all similar cases pending before high courts of Delhi, Allahabad and Madras to be transferred to the Supreme Court. It claimed that there is a likelihood of conflict of judicial decisions that would lead to “confusion and uncertainty for lenders, borrowers, defaulters and other involved parties”.

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