Resolution Of Stressed Assets - RBI's New Framework

INTRODUCTION

The Reserve Bank of India ("RBI") had issued a circular dated February 12, 2018 introducing a revised framework for resolution of stressed assets by scheduled commercial banks and all India financial institutions ("Prior Framework"), which was struck down by the Supreme Court of India vide its judgement dated April 2, 2019 in the case of Dharani Sugars and Chemicals Limited v. Union of India¹ ("Dharani Sugars judgment") on the ground of being ultra vires section 35AA of the Banking Regulation Act, 1949 ("BR Act"). Consequently, all actions taken under the Prior Framework, including proceedings by financial creditors² against debtors under section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC") pursuant to the Prior Framework, became null and void.