More than 24 stressed power projects that could have faced insolvency proceedings will now find it hard to get buyers because they are “incomplete”
Companies News: The Supreme Court (SC) on Monday provided a huge relief to thermal power projects worth Rs 2 trillion that were facing the threat of insolvency. The apex court held a 12 February 2018 circular of the Reserve Bank of India (RBI), which ordered banks to classify companies as ‘stressed’ if they default on loans even for a day, to be ‘ultra vires’. The SC said that the circular that applied to numerous defaulting assets in power, sugar, shipping and companies in other sectors to be beyond the RBI’s legal powers. A detailed copy of the judgement is awaited.
The February 12 circular allowed 180 days for the debt resolution of companies with loan accounts over Rs 2,000 crore, failing which the asset would have to be taken to the National Company Law Tribunal (NCLT) for insolvency action. The 180-day deadline got over on 31 August 2018. However, most companies took the legal route to avoid being dragged to NCLT. The last financial year closed with only one power asset successfully completing debt resolution.
Power companies such as Essar Power, GMR Energy, KSK Energy, and Rattan India Power as well as The Association of Power Producers (APP) and Independent Power Producers Association of India had moved the Supreme Court in August last year, challenging the constitutional validity of the RBI circular.
In their submission, the power companies pleaded for relief from the circular as several resolution plans are under implementation. Power companies also said the ‘one size fits all’ approach of the RBI doesn’t suit them as they are governed by different regulations…
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