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2021 (3) TMI 906 - HC - Insolvency and BankruptcyRole of an Asset Reconstruction Company under the Insolvency and Bankruptcy Code - resolution plan submitted by the Petitioner is stated to have already been approved by the NCLT - HELD THAT - The issues raised in this petition are of importance inasmuch as they would involve the reconciliation of the provisions of the SARFAESI Act and the IBC. Considering that the role of Asset Reconstruction Companies in resolution/liquidation processes under the IBC, has arisen for determination, it is deemed appropriate to direct that the officials of the Respondent No. 1 - Department of Financial Services, Ministry of Finance and the Ministry of Corporate Affairs shall arrive at a consensus and file a common affidavit after consulting with the officials of the Reserve Bank of India, on the said issue. List on 19th May, 2021. Interim orders to continue in the meantime.
Issues:
1. Role of Asset Reconstruction Company under the Insolvency and Bankruptcy Code (IBC) in the context of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act). Analysis: The judgment addresses the issue of the role of an Asset Reconstruction Company under the IBC concerning the provisions of the SARFAESI Act. The court highlighted the interplay between Section 29A(j) of the IBC and Section 10 of the SARFAESI Act. It was noted that while the IBC does not prohibit an Asset Reconstruction Company from submitting a resolution plan, the SARFAESI Act mandates prior approval from the Reserve Bank of India for such companies to engage in any business beyond securitization or asset reconstruction. The specific case involved a Petitioner Company, an asset reconstruction company, participating in the Corporate Insolvency Resolution Process of certain entities before the NCLT. The NCLT had approved the Petitioner's resolution plan but directed them to obtain approval from the Reserve Bank of India. The RBI denied approval, leading to a show cause notice being issued to the Petitioner for violating Section 10 of the SARFAESI Act, which was challenged in the present petition. The Reserve Bank of India argued that prior approval from the RBI was a prerequisite for submitting a resolution plan, and since the Petitioner did not obtain such approval, their plan was deemed invalid. The Union of India sought time to present the stand of the Department of Financial Services and the Ministry of Corporate Affairs on the matter, indicating the involvement of multiple ministries in the decision-making process. Given the significance of reconciling the provisions of the SARFAESI Act and the IBC regarding the role of Asset Reconstruction Companies, the court directed the concerned ministries to consult with the RBI and file a common affidavit to address the issue. The court set a deadline for filing the affidavit and scheduled the next hearing to further deliberate on the matter, with interim orders to remain in effect until then.
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