SC: Public Premises Act Prevails over State Rent Laws For Evicting Unauthorised Occupants  ||  SC: Doctors Were Unwavering Heroes in COVID-19, and Their Sacrifice Remains Indelible  ||  SC Sets Up Secondary Medical Board to Assess Passive Euthanasia Plea of Man in Vegetative State  ||  NCLAT: Amounts Listed As ‘Other Advances’ in Company’s Balance Sheet aren’t Financial Debt under IBC  ||  NCLT Ahmedabad: Objections to Coc Cannot Bar RP From Challenging Preferential Transactions  ||  J&K&L HC: Courts Should Exercise Caution When Granting Interim Relief in Public Infrastructure Cases  ||  Bombay HC: SARFAESI Sale Invalid if Sale Certificate is Not Issued Prior to IBC Moratorium  ||  Supreme Court: Police May Freeze Bank Accounts under S.102 CrPC in Prevention of Corruption Cases  ||  SC: Arbitrator’s Mandate Ends on Time Expiry; Substituted Arbitrator Must Continue After Extension  ||  SC: Woman May Move Her Department’s ICC For Harassment by Employee of Another Workplace    

Supreme Court strikes down RBI Circular imposing stringent conditions on lenders - (02 Apr 2019)

Banking

Supreme Court has quashed circular passed by RBI on 12thFebruary, 2018, asking banks to classify a loan account as stressed, if there was even a day of default by Corporate and Industries. The decision rendered in a batch of petitions, transferred to the Supreme Court from various High Courts wherein the RBI's circular of February 12, 2018, was challenged. The Circular imposed stringent conditions on lenders in relation to huge loan accounts. Circular is discriminatory as it applied a 180-day limit to resolve bad debts to all sectors of the economy without going into the special problems faced by each sector. On failing to resolve debts, banks are directed to initiate insolvency proceedings as per impugned Circular.

As per Section 35AA of Banking Regulation Act, 1949, the Central Government may, by order, authorise the RBI to issue directions to any banking company or banking companies when it comes to initiating the insolvency resolution process under the provisions of the Insolvency Code. Without such authorisation, the RBI would have no such power. The RBI’s satisfaction in superseding the board of directors of banking companies can only be exercised in consultation with the Central Government, and not otherwise.

Supreme Court observed that, if a statute confers power to do a particular act and has laid down the method in which that power has to be exercised, it necessarily prohibits the doing of the act in any manner other than that which has been prescribed. The RBI can only direct banking institutions to move under the Insolvency Code, if two conditions precedent are specified, namely, (i) that there is a Central Government authorisation to do so; and (ii) that it should be in respect of specific defaults. Supreme Court declared impugned circular as ultra vires. Consequently, all actions taken under the said circular, including actions by which the Insolvency Code has been triggered must fall along with the said circular.

Tags : CIRCULAR   CONDITION   ULTRA VIRES  

Share :        

Disclaimer | Copyright 2025 - All Rights Reserved