The Reserve Bank of India (RBI) has moved the Hyderabad High Court seeking to permit State Bank of India to go ahead with insolvency proceedings against Anrak Aluminium, an Indo-UAE joint venture.
In March, the high court had stayed the proceedings before the National Company Law Tribunal (NCLT), after Anrak Aluminium approached the court saying that it had already entered into a one-time settlement with lenders. Challenging this, the banking regulator told the court that neither the company formulated any resolution plan before the deadline nor the lenders approved any resolution plan.
The joint venture between the Penna group and UAE’s Ras Al Khaimah Investment Authority had also contested the directives given by the RBI to SBI on December 27 to initiate insolvency proceedings, saying that it was “without application of mind and without considering the fact that a resolution plan was already in place and was being implemented before December 13, 2017.”
Anrak had also challenged the jurisdiction and authority of the RBI and submitted to the high court that the provisions of Section 35-1 of the Banking Regulation Act only empowered the central bank to issue general directions. The company said such a power would not extend to taking up specific cases and directing a “bank to undertake a specific exercise in a specific manner against a specific borrower or person”.
Arguing against the contentions of Anrak, the banking regulator said: “Framing regulations concerning resolution of bad debts in the financial system is a matter of economic policy, the powers of which vest with Respondents No 1 (RBI) being the regulatory body and expert thereof.”
The RBI said it was empowered and had the discretion to make decisions in respect of issuing directions to banks on restructuring and resolution of debt and to “initiate insolvency resolution process in respect of a default”.
The banking regulator said the company would have “the opportunity to have its debt restructured by a democratic process under IBC (Insolvency and Bankruptcy Code) and there is no conceivable reason why the petitioner ought to resist such a resolution, more so when the petitioner itself wanted to undergo insolvency process under IBC, unless it is motivated by the promoter’s desire to remain in control.”
SBI legal counsel VK Sajith confirmed the RBI’s petition, but refused to comment on the matter terming it sub judice. The company had defaulted on ?3,242 crore of rupee loans and $96 million of external commercial borrowings to the SBI-led lenders’ consortium.
The NCLT bench had in October last year dismissed an insolvency petition filed by Anrak Aluminium, citing national interests.
The tribunal had then directed both company and its lenders to explore the possibility of commencing commercial operations instead of looking to winding up and liquidating the assets.
Source: Economic Times, July 3, 2018