Supreme Court stays insolvency proceedings against defaulters

supreme court

The Supreme Court on Tuesday halted insolvency proceedings against defaulters in the sugar, power, shipping, and textile sectors and asked banks to maintain status quo for the same in the country. The relief came hours before the deadline for referring them to insolvency court expired by staying RBI’s circular issued in February.

Bankers said the decision has delayed the process till the next hearing scheduled on November 14. The bankers welcomed the decision of the top judicial authority as it would help give them to give final shape to lawful questions and bring together multiple suits in courts across the country, which earlier were complicating the process.

A bench headed by Justice R.F Nariman also asked the banks not to file any insolvency cases till November when the apex court would hear the matter.

It also agreed to transfer 12 pending cases to itself from different high courts for matters related to insolvency and defaulters.

The Reserve Bank of India revised the framework introduced on February 12 this year which includes provisions to declare a company bankrupt even on a one-day overdue. Whereas, RBI’s new framework  mentions that lenders have to provide for resolution plan within 180 days in case of large due amount of Rs.2000 crore and above.

In its circular, the RBI has said that if a resolution was not found by August 27, NPA accounts should be sent to bankruptcy courts.

Banks have exposure of around Rs 1.74 lakh crore to stressed power assets.

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