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         “Resolution            of      Stressed          Assets         –      Revised
         Framework

1. The Reserve Bank of India has issued various instructions aimed at resolution of stressed assets in the economy, including introduction of certain specific schemes at different points of time. In view of the enactment of the Insolvency and Bankruptcy Code, 2016 (IBC), it has been decided to substitute the existing guidelines with a harmonised and simplified generic framework for resolution of stressed assets. The details of the revised framework are elaborated in the following paragraphs.

i. If in default as on the reference date, then 180 days from the reference date.

ii. If in default after the reference date, then 180 days from the date of first such default.

9. If a RP in respect of such large accounts is not implemented as per the timelines specified in paragraph 8, lenders shall file insolvency application, singly or jointly, under the Insolvency and Bankruptcy Code 2016 (IBC)7 within 15 days from the expiry of the said timeline8.

20. The above guidelines are issued in exercise of powers conferred under Section 35A, 35AA (read with S.O.1435 (E) dated May 5, 2017 issued by the Government of India) and 35AB of the Banking Regulation Act, 1949; and, Section 45L of the Reserve Bank of India Act, 1934.”

2. It will be noticed that the salient features of this circular are that restructuring in respect of borrower entities de hors the Insolvency and Bankruptcy Code, 2016 [“Insolvency Code”] can only occur if the resolution plan that involves restructuring is agreed to by all lenders, i.e., 100 per cent concurrence. Secondly, what has been chosen to be the subject matter of the circular is debts with an aggregate exposure of INR 2000 crore and over on or after 01.03.2018. With respect to such debts, if default persists for 180 days from 01.03.2018, or if the date of first default is after 01.03.2018, then 180 days calculated with effect from that date, lenders shall file applications singly or jointly under the Insolvency Code within 15 days from the expiry of the aforesaid 180 days. In short, unless a restructuring process in respect of debts with an aggregate exposure of over INR 2000 crore is fully implemented on or before 195 days from the reference date or date of first default, the lenders will have to file applications as financial creditors under the Insolvency Code. It will be noticed that the sources of power for issuance of the aforesaid circular have been stated to be Section 35A of the Banking Regulation Act read with the Central Government’s circular dated 05.05.2017, Sections 35AA and 35AB of the said Act, and Section 45L of the Reserve Bank of India Act, 1934 [“RBI Act”]. It may be stated here that by an order dated 11.09.2018, this Court allowed various transfer petitions and made orders in Writ Petition No. 1086 of 2018, by which it was ordered that status quo as of today shall be maintained in the meantime. As a result, insofar as the petitions and transferred cases in this Court are concerned, the circular has, in effect, been stayed on and from 11.09.2018.

24. A cursory reading of Section 35A makes it clear that there is nothing in the aforesaid provision which would indicate that the power of the RBI to give directions, when it comes to the Insolvency Code, cannot be so given. The width of the language used in the provision which only uses general words such as ‘public interest’ and ‘banking policy’ etc. makes it clear that if otherwise available, we cannot interdict the use of Section 35A as a source of power for the impugned RBI circular on the ground that the Insolvency Code, 2016 could not be said to have been in the contemplation of Parliament in 1956, when Section 35A was enacted. Dr. Singhvi’s contention must, therefore, fail.