The Reserve Bank of India (RBI) is understood to have raised the issue of the Allahabad High Court’s jurisdiction in regard to a plea against the central bank’s February 12 circular, mandating a one-day default trigger for resolution of stressed power assets.
While the central bank reiterated its stance on Tuesday that the circular cannot be relaxed exclusively for the power sector assets, the court listed the next hearing on August 20.
The RBI wants all similar cases pending before high courts of Delhi, Allahabad and Madras transferred to the Supreme Court on the grounds 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”.
Arguing against relaxing the circular for the power sector, the RBI has made it clear that if the government favours such dispensation for the sector, it should use its power and issue directions directly to the central bank in this regard.
The RBI’s February 12 circular stipulates a one-day default rule on term loans, which mandates treating a borrower who misses repayments as a defaulter the very next day. It requires banks to finalise a resolution plan in case of a default on large accounts of `2,000 crore or more within 180 days (irrespective of sectors), failing which insolvency proceedings will have to be invoked against the defaulter.