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ARTICLE · 04 DECEMBER 2019

RBI's Circular On NPAs: Square Peg For A Round Hole?

Clarus Law Associates
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The Supreme Court has in the matter of Dharani Sugars and Chemicals Ltd. v Union of India1 ("the Judgment") struck down a circular issued by the Reserve Bank of India...

IndiaFinance and Banking
Piyush Joshi
Piyush Joshi
Telma Raju
Telma Raju

The Supreme Court has in the matter of Dharani Sugars and Chemicals Ltd. v Union of India1 ("the Judgment") struck down a circular issued by the Reserve Bank of India ("RBI") titled "Resolution of Stressed Assets- Revised Framework" ("RBI Circular") as ultra vires the provisions of the Banking Regulation Act 1949 ("Banking Regulation Act"). The RBI Circular had mandated banking companies to initiate action under the IBC under certain strict timelines, which the Petitioners claimed was arbitrary and unconstitutional. The ruling comes as a respite to various debtors against whom action had been taken pursuant to the RBI Circular. However, the ruling does not impact proceedings under the Insolvency and Bankruptcy Code (IBC) that have been initiated outside of the purview of the RBI Circular.

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