• Financial & Insolvency Law

    RBI Overhauls its NPA Regime: IBC to Hold the Fort? [Part V: The Impact and Criticism of RBI’s New NPA Regime]

    The Impact The Notification has not done away with the conciliatory means to be employed by the lenders to course correct the stressed account upon default, it has only been rebranded in the wide ambit of a ‘Resolution Plan’ which encompasses, in essence, all of the tools under the previous regime[1]. The major change in the regime however is the stipulation of pursuing the debt in default under the Insolvency and Bankruptcy Code, 2016, where there is failure in the implementation of the Resolution Plan. The notification is only an exercise in the implementation of the statutory power that has been bestowed upon the RBI[2]. The Notification makes the RBI’s…

  • Financial & Insolvency Law

    RBI Overhauls its NPA Regime: IBC to Hold the Fort? [Part IV: Understanding RBI’s New NPA Regime]

    In the past, banks have played both victim and perpetrator under the scheme of the Joint Lenders Forum while they plead for more power to be vested them the in the forum, at the same time, the bank executives are the ones that have led the mismanagement of the accounts and have also engaged in underhanded deals that empower the creation and sustenance of the substantial NPAs as was revealed in the midst of various scandals like the Videocon[1], Nirav Modi[2], Mehul Choksi[3]and Vijay Mallaya[4]scandals, that have been the cause of great national embarrassment and financial loss. RBI vide its Notification dated 12thFebruary 2018 had set a deadline of 27thAugust,…

  • Financial & Insolvency Law

    RBI Overhauls its NPA Regime: IBC to Hold the Fort? [Part III: RBI’s First Attempt at an IBC backed NPA Resolution Framework and the 12 Mega-Defaulters]

    With the enactment of the Banking Regulation (Amendment) Act, 2017, RBI has been vested with the power to direct banks to initiate Corporate Insolvency Resolution Process against any borrower who has defaulted on any payment under §§ 35AA and 35AB of the BR Act. The Provisions are reproduced here-under: [Part II of this series can be found here] “35AA. The Central Government may, by order, authorise the Reserve Bank to issue directions to any banking company or banking companies to initiate insolvency resolution process in respect of a default, under the provisions of the Insolvency and Bankruptcy Code, 2016. 35AB. (1) Without prejudice to the provisions of section 35A, the Reserve…

  • Financial & Insolvency Law

    RBI Overhauls its NPA Regime: IBC to Hold the Fort? [Part II: RBI’s Outgoing NPA Regime]

    RBI has played an active role in combatting the growing NPAs that have plagued the nation. Before assessing the contours of the new regime, it is necessary to understand the former. Some of the tools employed under RBI’s erstwhile regime are as follows: [Part I of this series can be found here] Joint Lender’s Forum: The Joint Lender’s Forum is a dedicated grouping of lender banks that is formed to speed up decisions when an asset (loan) of Rs 100 crore or more turns out to be a stressed asset. RBI has issued guidelines for the formation of JLF in 2014 for the effective management of stressed assets[1]. The JLF has…

  • Financial & Insolvency Law

    RBI Overhauls its NPA Regime: IBC to Hold the Fort? [Part I: Introduction]

    Non-Performing Assets represent a default on the loan amount whether principal, interest or both remaining overdue for more than 90 days. The overwhelming burden of NPAs that plague India has had a devastating effect on the growth of the economy, investor confidence and the due process of credit in the industry. This series of articles analyses the new overhauled framework of the Reserve Bank of India aimed at combatting NPAs, its implications on the economy along with the merits and demerits of its stipulations. The Reserve Bank of India (here-in-after referred to as “RBI) has in the past, undertaken various ambitious endeavours in order to combat the overwhelming and devastating…

  • Financial & Insolvency Law

    Corporate Insolvency and the Admission of a Debt under the Negotiable Instruments Act

    The National Company Law Appellate Tribunal (“NCLAT”) has in the case of Sudhi Sachdev Vs. M/s APPL  Industries Ltd. held that the pendency of a case under Section 138/141 of the Negotiable Instruments Act, 1881 (“NI Act”)  amounts to an admission of debt by the Corporate Debtor as against an Operational Creditor despite the criminal nature of the proceedings under Section 138/141 of the NI Act forming outside the scope of Section 8(2)(a) R/w Section 5(6) of the Insolvency and Bankruptcy Code, 2016 (“Code”). This article seeks to critically examine the rationale behind this decision.   Background Under the Code, Section 8 stipulates that before an application for the initiation of Corporate Insolvency resolution…

  • Financial & Insolvency Law

    Supreme Court Re-Iterates Position: I&B Code, 2016 Prevails Over the Income Tax Act, 1961

    The Hon’ble Supreme Court of India by its Order dated 10thAugust, 2018 in the case of Pr. Commissioner of Income Tax Vs. Monnet Ispat and Energy Ltd., has held that the provisions of moratorium stipulated under Section 14 of the Insolvency and Bankruptcy Code, 2016 (“ Code”)  would override anything inconsistent contained in any other enactment, including the Income Tax Act, 1961thereby upholding the Judgment of the Hon’ble High Court of Delhi to the same effect in 2017 which had been challenged before the Hon’ble Apex Court.  Moratorium Order Explained Under the Code, an order for moratorium is a legal authorization for the Corporate Debtor to postpone the determination of claims and their recovery that…

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