34 power firms face bankruptcy as court declines relief on RBI order

About 34 power sector companies among 70 defaulters face bankruptcy court proceedings for recovery of loans, after the Allahabad high court on Monday declined to halt implementation of the Reserve Bank of India’s February order on non-performing assets.

These companies, with a combined debt of approximately Rs3,60,00 crore, face insolvency proceedings, after the deadline imposed by the RBI on resolution of insolvency ended on Monday. 
Power companies, including GMR Chhattisgarh, Ind-Barath Energy (Utkal), Lanco Anpara and Jindal India Thermal Power, together account for more than Rs1,75,000 crore to banks and various financial institutions,
Lenders will now have to move court for recovery of loans from these companies and the companies face liquidation unless the government opts to override RBI and grant protection to these defaulters.
As per the RBI circular banks have to take all large loan accounts above Rs2,000 crore into bankruptcy court proceedings if a resolution plan is not agreed upon in 180 days.
The high court had, in May 2018, temporarily stayed the RBI’s circular after hearing a clutch of petitions from various power sector lobby groups.
The RBI circular, issued in February, had given banks and financial institutions 180 days from 1 March 2018 to work out a resolution plan for accounts that were overdue by a single day. If they failed to do so in 180 days, banks have to initiate insolvency proceedings as per the strict timelines prescribed by the central bank.
RBI had taken a stand that there cannot be any separate rules for banks in the matter of loan repayment and the Allahabad high court had agreed with this.
While the Allahabad HC has given its verdict there are several cases pending in high courts across the country against the RBI’s February order. RBI has sought transfer of all pending cases on its order to the Supreme Court and the apex court will start hearing of RBI’s petition tomorrow.
Bankers, meanwhile, indicated that the RBI has given lenders another 15 days to appoint resolution professionals and legal counsel.
Lenders have been working round the clock to reach settlement with promoters of KSK Mahanadi, Prayagraj Power, JP Power Venture, SKS Power, Jhabua Power and Coastal Energen.
State Bank of India chairman Rajnish Kumar recently said seven cases in the power sector are likely to be resolved outside of bankruptcy court. Of these, he said, four are approved by SBI and remaining four would be approved in the next within two days.
These resolution proposals, however, involve up to 50 per cent loss to lenders, which may be too heavy for most banks.