TMI Blog2018 (10) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... ere were several other accounts meeting the same criteria, but had not been included in the list of accounts to be referred under the IBC. This contention is seriously disputed by RBI. However, even if it is accepted that there are other accounts qualifying the criteria as adopted by the RBI but have not been included in the list, no interference in these proceedings would be warranted. Clearly, all accounts cannot be referred to the IBC in one trench, as that would tend to clog the docket of NCLT. The RBI retains full discretion as to which account is to be included in which trench and this Court finds no reason to interfere with the exercise of such discretion. petition dismissed. - W.P.(C) 4842/2018 & CM Nos. 18639-18640/2018, 20613/2018, 32140/2018, 32821/2018 - - - Dated:- 9-10-2018 - MR. VIBHU BAKHRU J. Petitioner Through: Mr. Abhinav Vashisht, Sr. Advocate with Ms. Mahima Singh, Advocate. Respondents Through: Mr. Sandeep Sethi, Sr. Advocate with Mr. A. R. Chowdhary, Mr. V. P. Singh, Ms. Vatsala Rai, Mr. P. B. Lal, Mr. Raghav Seth and Mr. A. Modi, Advocates for R-1/RBI. Mr. Ankur Mittal, Advocate for R-2 O R D E R VIBHU BAKHRU, J 1. The petitioner h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble and falls foul of Article 14 of the Constitution of India. 4. Briefly stated, the relevant facts necessary to address the controversy are as under:- 4.1 During the period 2010 to 2015, the petitioner had borrowed significant sums from a consortium of lenders comprising of fifteen banks. Admittedly, the amount outstanding to the said banks has swelled up to around ₹3900 crores. The petitioner claims that it suffered losses due to the adverse economic scenario including the recession in the steel industry. 4.2 On 26.02.2014, the RBI issued a Circular titled Framework for Revitalizing Distressed Assets in the Economy Guidelines on Joint Lenders Forum (JLF) and Corrective Action Plan (CAP) . In terms of the said Circular, the banks were required to identify incipient stress in the accounts by categorizing the same as Special Mention Accounts (SMA). The said accounts were further to be sub-categorized into three sub-categories: SMA-0 (Where principal or interest payment is not overdue for more than 30 days); SMA-1 (principal or interest payment is overdue between 31-60 days); and SMA-2 (principal or interest payment overdue between 61-90 days). If the default cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the reference date i.e. 01.03.2018, and within a period of 180 days from the first default in case, the said default occurred after the reference date. The petitioner claims that it was in the process of implementing a resolution plan and given the time as specified in Paragraph 8 of the Circular dated 12.02.2018, it would have been possible for the lenders to evolve an appropriate resolution plan. It was also emphatically contended by Mr. Abhinav Vashisht, learned Senior Counsel who appeared for the petitioner that part of the debts that had already been signed by the existing lenders to a Non-banking Financial Company (NBFC). In the meanwhile, Sections 35AA and 35AB of the Banking Regulation Act, 1949 were introduced by the Banking Regulation (Amendment) Ordinance, 2017 which was issued on 04.05.2017. In terms of Section 35AB of the Banking Regulation Act, the RBI was authorized to issue directions to banks for resolution of stressed assets. Subsequently, the said Ordinance was replaced by the Banking Regulation (Amendment) Act, 2017, which came into effect on 25.08.2017. Section 35AA and 35AB of the Banking Regulation Act, 1949 as introduced by the aforementioned enactment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. Of the said top 500 exposures, it was noted that 71 accounts had been partly or wholly classified as NPAs while the other 429 were not classified as NPA by any bank. Four of these 71 accounts were overseas registered companies and hence, could not be considered for reference to IBC. Thus, the IAC considered 67 borrower entities registered in India, which were partly or wholly classified as NPAs, for resolution. It was also noted that these 67 accounts accounted for INR 491,408 crores of fund and non-fund based outstanding in the Indian banking system as on 31.03.2017. d. In view of various factors (including focusing on large assets for quick minimization of economic losses; the necessity of not overloading the nascent mechanism of the IBC; attempting the resolution of a significant portion of the NPAs) the IAC decided to refer accounts for resolution in a phased manner. Therefore, as an immediate step, the IAC recommended an initial set of large, materially stressed accounts to be referred to the resolution mechanism under the IBC. For the purpose of this short listing, the following criteria was applied: Accounts where the funded plus non-funded outstanding was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13, 2017 for resolution, failing which these should be referred under IBC by the banks concerned. It is pertinent to note that these 29 accounts comprised the accounts in the Second List. 26 accounts, which were not materially NPA as on June 30, 2017, i.e., where less than 60 percent of the banks funded and non-funded outstanding were classified as NPA as on June 30, 2017, may be addressed as part of a generic framework for resolution of stressed assets. 6. There is no dispute that the petitioner again qualifies the objective criteria as adopted by the RBI for short listing the account, namely:- (i) with its one of the NPA accounts out of the 500 NPA accounts with the highest exposure to the Indian Banking System as on 31.03.2017; and (ii) 60% of the total outstanding of the included account become NPA by 30.06.2017. 7. This Court is not called upon to evaluate the criteria adopted by the RBI on merits. The scope of judicial review is limited and unless it is established that the same is arbitrary, unreasonable, capricious or mala fide, no interference by this Court would be warranted. Clearly, none of the aforesaid grounds are established. 8. It is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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