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TMI Blog2017 (7) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... company to explain that why such an application should not be entertained. It would be a decision based on judicial discretion by the adjudicating authority to deal with such application in accordance with law and based upon facts, evidence and circumstance placed before it. To that extent, prayers 7(b) and (c) cannot be granted. Then, remains the only issue that whether RBI is empowered to publish press release dated 13.6.2017 or not. So far as directions to the Bank to initiate insolvency proceedings against companies, which are in debt to certain level or extent, the amended provisions of the Banking Regulation Act, 1949 in the form of Sections 35(AA) and (AB), certainly makes it clear that, now, RBI has such powers to issue certain directions to certain Banks and banking companies so as to see that there is proper recovery of public money or for any other such purpose. Therefore, the issuance of press release alone, cannot be quashed and set-aside. So far factual details of Petitioner Company with reference to its activities and exercise of restructuring through JLF is concerned, it would be appropriate not to enter into any determination on such point since that would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . SHAH, JJ. For The Petitioner : Mr Mihir Thakore, Senior Counsel with Mr Saurabh Soparkar, Senior Counsel with Mr Mihir Joshi, Senior Counsel with Mr Keyur Gandhi, Advocate with Mr Mahesh Agrawal, Advocate with Mr Nisarg Desai, Advocate with Mr Raheel Patel, Advocate with Mr Shriraj Khambete For Nanavati Associates, Advocate Mr Ravi Kadam, Senior Counsel with Mr Anshin Desai, Senior Counsel with Mr Nirag Pathak, Advocate With Mr Ameya Gokhle, Advocate with Ms Grishma Ahuja For Shardul Amarchand Mangaldas And Co, Advocate For The Respondent : Mr Darius Khambhatta, Senior Cousnel with Mr Amar N Bhatt, Advocate with Rajendra Barot, Advocate with Nishanth Shashidharan, Advocate with Mr Vivek Shetty Mr Kamal B Trivedi, Advocate General with Mr Rashesh Sanjanwala, Senior Counsel with Mr Sandeep Singhi with Mr Siddharth Joshi For Singhi Co, Advocate ORAL ORDER 1. Heard learned Senior Counsel Mr. Mihir Thakore, with learned Senior Counsels Mr. Saurabh Soparkar, and Mr. Mihir Joshi, with learned advocates Mr. Keyur Gandhi for M/s. Nanavati Associates, Mr. Mahesh Agrawal, Mr. Nisarg Desai, Mr. Raheel Patel and Mr. Shriraj Khambete for the petitioner on 7.7.2017 and 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the STATE BANK OF INDIA of filing proceedings under the Insolvency and Bankruptcy Code, 2016 in relation to the Petitioner; c) Issue a writ, order or direction or any other writ, order or direction quashing / setting aside the decision of the Standard Chartered Bankof filing proceedings under the Insolvency and Bankruptcy Code, 2016 in relation to the Petitioner; d) Issue a writ, order or direction restraining the respondent No.4 adjudicating authority under Bankruptcy Code, 2016 (National Company Law Tribunal, Ahmedabad) from proceeding further with proceedings in the petition initiated under Section 7 of Bankruptcy Code by Respondent 2 and 3; e) Issue a writ, order or directing Respondent to place the Petitioner in the category of companies falling in para 4 of the Press Release dated 13.6.2017 directing the banks to finalise the resolution plan within six months; Pass such other or further orders, as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case. 9. Since the main challenge in the petition is decision of June 13, 2017 in the form of press release by the RBI, it would be relevant to recollect its contents, as on 13.06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the National Company Law Tribunal (NCLT). 6. The details of the resolution framework in regard to the other non-performing accounts will be released in the coming days. 7. The circular on revised provisioning norms for cases accepted for resolution under the IBC is being issued separately. Jose J. Kattoor Chief General Manager Press Release: 2016-2017/3363 10. Thus the intention which is disclosed by the RBI is clear that they will identify the accounts, will issue directions to banks to file insolvency proceedings under the IBC and such cases will be accorded priority by the NCLT; as if they are directive authority above NCLT, when para 5 of the press release reads: 5. The Reserve Bank, based on the recommendations of the IAC, will accordingly be issuing directions to banks to file for insolvency proceedings under the IBC in respect of the identified accounts. Such cases will be accorded priority by the Natio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement, they failed to disclose their regret on record and therefore they have to file another affidavit on 14.7.2013, submitting as under: 3. Given the purpose of expeditious resolution of non-performing accounts for which the Press Release was issued, the words Such cases will be accorded priority by the National Company Law Tribunal (NCLT) ( the Sentence ) were included into the Press Release. The intention was to underline the time-bound nature of the resolution process envisaged under the Insolvency and Bankruptcy Code, 2016 and recommend to the Banks to make appropriate applications to the Hon ble National Company Law Tribunal for expeditious hearing. However, the language used did not properly express that intention, was unfortunate and is regretted. 4. However, Respondent No.1 forthwith issued the corrigendum for deleting the Sentence in deference to this Hon ble Court immediately after the hearing before the Hon ble Court on July 7, 2017. Respondent No.1 humbly submits that the intention was not in any manner to show disrespect to the Hon ble National Company Law Tribunal. 13. Therefore, though such issue may be tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue the press release has been recorded and no other document on the basis of which such decision is taken. However, there are subsequent specific directions issued to Bank. This also goes to show the manner in which RBI is functioning, inasmuch as there is a press release even without a decision at certain level that press release is to be published and what should be included in such press release. This is also an equally serious issue. It has been conveyed to the respondents that on such disclosure that there is no other document, pursuant to such disclosure, now, they would be debarred from relying upon any such document, if any. 2) With reference to such practice, if we peruse the press release dated 13.6.2017, now, when it becomes clear that there is one another press release dated 22.5.2017, (page 863 with the petition), which is also touching the subject under reference. Whereas the impugned press release dated 13.6.2017 is in fact based upon the previous press release of May 22, 2017; which reads as under: Date : May 22, 2017 Reserve Bank of India Outlines the action plan to implement the Banking Regulation (Amendment) Ordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to include more Members so that the OC can constitute requisite benches to deal with the volume of cases referred to it. While the current Members will continue in the reconstituted OC, names of a few more will be announced soon. The Reserve Bank is planning to expand the scope of cases to be referred to the OC beyond those under S4A as required currently. 5. The Reserve Bank is working on a framework to facilitate an objective and consistent decision making process with regard to cases that may be determined for reference for resolution under the IBC. Reserve Bank has already sought information on the current status of the large stressed assets from the banks. The RBI would also be constituting a Committee comprised majorly of its independent Board Members to advise it in this matter. 6. The current guidelines on restructuring are under examination for such modifications as may be necessary to resolve the large stressed assets in the banking system in a value optimising manner. The Reserve Bank envisages an important role for the credit rating agencies in the scheme of things and, with a view to preventing ratingshopping or any conflic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following amongst other submissions: 1) When the restructuring proposal was under active consideration by the Banks under the mandatory circulars issued by the Reserve Bank of India, Reserve Bank of India could not have issued a directive to the banks to take action to approach NCLT under the Insolvency and Bankruptcy Code, 2016 for resolution of the debt. The petitioners submit that the petitioner is not a willful defaulter and there is no allegation against the petitioner of diversion of funds, fraud or malfeasance. There is no opinion that the petitioner s industrial units are not viable if the debt is appropriately restructured. The petitioner s debt has not been restructured pursuant to the huge losses suffered by the petitioner in view of (i) steel industry getting out of being a priority core sector for supply of gas, (ii) international market of steel and (iii) dumping of foreign steel into the country and there is no failure on the part of the petitioner in not complying with the restructured debt. The petitioner has in fact paid ₹ 3467 Crores in the last 15 months to the banks and financial institutions. In the circumstances, there is a clear conflict between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect the SBI to initiate insolvency resolution process without considering the specific cases of default more particularly objective facts of the defaulting company and reaching a subjective satisfaction in respect of the same is clearly bad and is required to be quashed in view of the following decisions of the Supreme Court as the exercise of powers is arbitrary, unreasonable, manifestly unjust and outrageous: (i) Barium Chemicals v. Company Law Board AIR 1967 SC 295 (ii) Bhikhubhai Vitthalbhai Patel v. State of Gujarat AIR 2008 Supreme Court 1771 (iii) Vinod kumar v. State of Haryana (2013) 16 SCC 293 3) Without prejudice to the aforesaid, the circular dated 13.06.2017 issued by Respondent no.1 Reserve Bank of India in so far as it has classified the defaulting companies solely on the basis of outstanding amount greater than ₹ 5000 Crores with 60% or more classified as NPAs by banks as of 31.03.2016 and those not falling in the above criteria is clearly violative of Article 14 of the Constitution of India. The object of inserting Section 35AA of the Banking Regulation Act is to authorize the Reserve Bank of India to issue directions in respect of default to ini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith 60% or more classified as NPA as on 31.03.2016 and the others, it is evident that it has not taken into consideration any relevant factors except focusing on the large stressed accounts. The various factors which have been highlighted both in the petition and in written submission would indicate that the Petitioner s debt was in finalization stages of restructuring have been completely ignored by the Reserve Bank of India in issuing the directions. The relevant facts which ought to have been looked into before issuing the directions have been completely ignored. The process adopted by Reserve Bank of India is clearly unreasonable and deserves to be struck down. The Petitioner submits that the Petitioner Company has vast operation with multi-location facilities, the impact of the decision would be severe and may result in the Company going into serious problem because of the change in management. In such circumstances, the Reserve Bank of India ought to have considered all relevant facts other than the mere largeness of the stressed account before making such a vital decision. In these circumstances, such decision is clearly subject to judicial review. The Petitioner submits tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over management to a third party i.e., the IRP is bound to cause some disruption in production and erosion in value. It is for this reason that even the Banks have been actively discussing and negotiating a restructuring proposal for last over one year. A mutually acceptable restructuring proposal between the Petitioner and the Banks would ensure smooth operations as also repayment of debt as per the restructuring package. therefore RBI was not justified in categorizing the Petitioner with 11 companies headed for Bankruptcy proceedings or should have given an opportunity to restructure as has been done in respect of companies under para 4. No prejudice will be caused to the Banks by giving an opportunity to restructure the debt. The entire financial operations of the Company are already in the control of the Bankers. The Bankers have their nominee on the Board of Directors and all payments are made with the consent of the Bankers. The last one year s performance of the Company also shows that its manufacturing operations are improving and the repayments to the Banks are taking place. d) On the one hand there is serious likely hood of disruption or interference with the smooth o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Insolvency Resolution Process as per the Directive of the Reserve Bank of India. 15. As against that the Respondent No. 1 has submitted as under: 1) Despite the existence of several laws and statutory circulars issued by Respondent No.1 ( the RBI ) for recovery / restructuring of Non Performing Accounts ( NPA ), the problem of NPAs in India remained staggering. As on March 31, 2017, the gross NPAs in India aggregated more than ₹ 7,28,768 Crores, i.e., about 5% of the GDP. About 12% of the total advances by public sector banks are NPAs. Consequently, several banks, which should have been instruments for rejuvenating the economy, have been bogged down leading to systemic crisis in the Banking sector. NPAs cause economic loss to the country. 2) Even according to Petitioner, as on September 30, 2016, the total bank exposure of the Petitioner was admittedly ₹ 45,655 Crores (Annexure C at page 32). As per the data collected by Central Repository of Information on Large Credits, as on March 31, 2017, the total fund based outstanding of the Petitioner with banks was ₹ 33,842 Crores. As on 31st March 2016, an amount of ₹ 31,671 Crores (i.e., 94% of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tainly be expected to provide abstract symmetry . It can make and set apart the classes according to the needs and exigencies of the society and as suggested by experience (AIR 1952 SC 75 paragraph 44). [State of West Bengal v. Anwar Ali Sarkar An extreme case, unlike the present one, where the West Bengal Special Courts Act, 1950 laid down substantially different rules for trial of offences and denied the procedure under the Cr.P.C., imposed heavier liabilities, denied privileges, deprived the accused of the committal procedure, deprived them of a denovo trial in the case of transfer, deprived them of the right to call witness in defence and made them liable for conviction and punishment for major offences other than those for which they had been charged or tried.] 6) The RBI Directives are reasonable and make a classification valid under Article 14, because the Press Release and the Directives to Banks issued by the RBI were for giving effect to the economic policy contained in the IBC as well as the Ordinance and the Order in the following rational manner: a) the RBI constituted an Internal Advisory Committee ( IAC ) to advise it in regard to the cases that may be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NPAs abstract symmetry is not required. 9) In any event, the Petitioner has not shown that there is no reasonable basis for the classification (Union of India v. N. S. Rathnam Sons, (2015) 10 SCC 681 paragraph 13). 10) The Directive reflected in the Press Release is an economic measure by which the RBI seeks to tackle the problem of NPAs. It is well settled that laws relating to economic activities should be viewed with greater latitude and ought to be given some play in the joints as they deal with complex problems that do not admit of straitjacket formula solutions. Every legislation, particularly in economic matters, is essentially empiric and based on experimentation. Given the complexity of economic regulation greater judicial restraint is shown when adjudging the validity of economic legislation(R. K. Garg v. Union of India, (1981) 4 SCC 675 - paragraphs 7 - 8 @ pages 690 and 691). 11) Banks have already initiated proceedings against Jyoti Structures, Electrosteel Steels Limited, Monnet Ispat Limited and Amtek Auto Limited, some of the 12 companies identified by the IAC. Any order would have serious and far reaching ramifications on the entirety of proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prejudice caused to the Petitioner: from what is stated herein above, it is clear that the very package which was under consideration of the JLF can be considered by the RP under the IBC under Section 30(1). In fact, the process under the IBC will be structured by statute and confined by strict time lines for the corporate insolvency resolution process. The process is designed to ensure that where a company can be made viable it will have the best chance of doing so by a statutory and balanced reconstruction/resolution of its debt under the supervision and guidance of experts and the NCLT. Thus, no prejudice whatsoever will be caused to the Petitioner if SBI and SCB or either of them have initiated and proceed against it under the IBC. 19) It is also submitted by Ld. Sr. Counsel on behalf of Respondent no. 1 2, that because of appointment of IRP, the working of company will not be adversely affected and confirmed that it is provided in IBC and ensured that keeping in mind the scheme of IBC, though IRP will be appointed the management of company will not be changed because company is run by its officer and not by board of directors and thereby existing working of the company wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rium on institution of suits, transfer of assets, etc.; under Section- 15, there is a public announcement of corporate insolvency resolution process, under Section- 16, appointment of interim resolution professional ( IRP ) by the Adjudicating Authority and under Section- 17, the IRP takes over the management of affairs of the corporate debtor and the powers of Board of Directors or the powers of the corporate debtors stand suspended. These consequences are statutory in nature and there is no discretion with either the NCLT or the financial creditors in this regard. It is submitted that the Petitioners have not challenged this statutory scheme. 3) Since the Respondent No. 2- SBI, has a statutory right to apply under Section- 7, the same can be invoked irrespective of the Respondent No. 1- RBI Press Release/ directive. It is submitted that, an application filed by the Respondent No. 2 under Section-7 before the NCLT is in exercise of its statutory right and this right can always be exercised by the Respondent No. 2, independently of directions given by the Respondent No. 1. Seen in this light, the challenge to the Press Release of the Respondent No. 1 dated 13.06.2017/ or any oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings against the Petitioner before the NCLT. The Petitioners have consented, accepted and acquiesced in the proceedings being initiated by the Respondent No. 2- SBI before the NCLT. 5) The following letters/documents demonstrate that, the Petitioners were aware and have consented to and accepted the proceedings being adopted by the Respondent No. 2 before NCLT: 6) The Email Notice of the JLF meeting issued by the Respondent No. 2 on15th June, 2017 (which is at Annexure V of the Additional Affidavit dated 13.07.2017 filed by the Petitioner in the present proceedings)which specifies that: We propose to hold a meeting of Top Management of the lenders,under JLF, of Essar Steel India Limited at State Bank of India,Corporate Centre, Madame Cama Road, Nariman Point, Mumbai at10.30 a.m. on 22nd June, 17 (Thursday) at Board Room (18th Floor). 7) The Petitioner s presentation (Page-919 to 929) before the Joint Lenders meeting held on 22.06.17. This acquiescence and in any event acceptance and consent can be borne out from the Petitioners‟ statement. We have been informed that the Reserve Bank of India (RBI) has directed lenders to file an application under NCLT process (Page ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SIL management team and allow it to operate on a day to day basis with checks and balance already in place so as to ensure continuity of operations; and (b) work in a cohesive manner with the lenders and promoters/personnel of ESIL to draw a suitable financial package and to implement the same in a time bound manner with a view to sustain and preserve the value of ESIL. We look forward to continuing to work with the lenders to ensure speedy resolution of issues faced by ESIL and its successful turnaround in a timebound and effective manner. (Page-935of Writ Petition) 13) By another letter dated 27.06.2017, the Petitioners requested for an interim standstill on tagging payments in following words: 14) Subject: RBI Press release dated June 13, 2017 Meeting of JLF on22nd June 2017 Request for an interim standstill on tagging payments. (Page-936 of Writ Petition) 15) By the said letter, the Petitioners made suggestion for the same, which would, according to them, assist the company in sustaining its operations, during the time the resolution plan was implemented under the aegis of NCLT. which will assist the company in sustaining its operations during the time the Resol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular manner. Therefore, even if aim of the Code may be proper, the reason for such aims so also the provisions of the Code should be in concurrence of constitutional mandates. However, when such Code is not under challenge, I do not have to opine on such issues. 19) It is submitted that, the right to management of a company is not an absolute right but, is always subject to law. Even under the provisions of the Companies Act, 2013, Section 242 states that, if the NCLT is of the opinion that the company s affairs have been or are being conducted in a manner, which is prejudicial or oppressive to any member or members, or prejudicial to public interest or in a manner prejudicial to the interests of the company, the Tribunal may pass an order for the removal of the managing director, manager or any of the directors of the company. 20) It is submitted that, the Insolvency Code in Section- 17 provides that, the management of the company shall vest with the IRP from the date of such resolution professional s appointment. Furthermore, Section- 17 (1) (b) of the IBC provides that, the powers of the board of directors of the corporate debtor shall stand suspended and be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offshore bank and the transaction was executed outside the territory of India. 2) The Respondent No 1 regulates banking companies in India under the Banking Regulation Act, 1949, as amended (the BR Act ).Under the BR Act, a banking company is defined as a company which transacts the business of banking in India . In view of the aforesaid, the Respondent No. 3 cannot be said to be a banking company under the provisions of section 5(c) read with section 5(d) of the Banking Regulation Act, 1949, as amended from time to time (hereinafter referred to as the BR Act ) for the purpose of the transactions carried out beyond the territory of India. It therefore follows that the Respondent No. 3 is not bound by the directions of the Respondent No. 1, by way of its circulars or otherwise. It is, therefore, categorically stated that the Respondent No. 1 cannot and has not issued any directives to the Respondent No. 3 for proceeding against the Petitioner No. 1 under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the IBC ), as has been done in the case of the Respondent No. 2. Therefore, the action of the Respondent No. 3 to proceed against the Petitioner No. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease note that as per the applicable laws of India and RBI regulations, the Joint Lenders Forum (JLF) has been mandatorily constituted by Indian (Onshore) lenders of ESIL to consider options for restructuring the debt of ESIL. SCB is not a part of the JLF and discussions being held at this forum [Page 771 of the captioned petition] iii. Minutes of the Core Committee Meeting (JLF) held on 09.05.2017, the relevant extract of which reads as follows: Further, SCB being an unsecured creditor, cannot be ranked at par with secured lenders and therefore, the issue cannot be addressed in JLF. The Company was further advised to resolve the matter bilaterally with SCB at the earliest [Page 88; at page 90 of the captioned petition] iv. Minutes of the Board Meeting of the Petitioner No. 1 dated 15.05.2017, the relevant extract of which reads as follows: The Board members deliberated on legal suit filed by Standard Chartered Bank with regard to the loan availed by Essar Steel Offshore Ltd, wholly owned subsidiary of the Company for which Corporate Guarantee was given by the Company. It was informed that dues payable to Standard Chartered Bank is not forming part of the Debt Struct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 28.01.2017 as the same was untenable and virtually destroyed the value of the debt owed to the Respondent No. 3. [Page 758 of the captioned petition]. iv. The Respondent No. 3, vide various correspondences dated 28.01.2017 [Page 758; at page 759 of the captioned petition], 21.02.2017 [Page 760; at page 764 of the captioned petition], 22.03.2017 [Page 768; at page 769 of the captioned petition], and 21.06.2017 [Page 781; at page 783 of the captioned petition], had informed the Petitioner No. 1 about its intention to initiate action under the IBC pursuant to the default committed by the Petitioner No. 1. v. Nothing in the IBC states that if there are ongoing negotiations between the borrower and the financial creditor, proceedings under the IBC cannot be initiated. It can also be observed from the aforesaid that the Respondent No. 3 had expressed its intention to initiate action against the Petitioner No. 1 under the IBC much before the Press Release was issued by the Respondent No. 1. In the circumstances, it is false to the knowledge of the Petitioner No. 1 that the initiation of proceedings under the IBC by the Respondent No. 3 was pursuant to the directive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ires or unconstitutional, or (iv) proceeds to act in contravention of fundamental rights. In this regard, reliance is placed of the following decision of the Hon ble Supreme Court: Thirumala Tirupati Devasthanams Anr. V. Thallappaka Ananthacharyulu Ors., reported in (2003) 8 SCC 134 10) No such case is made out by the Petitioners in the captioned petition. The Petitioner No. 1, while approaching this Hon ble Court, has suppressed various facts and correspondences in respect of its dues payable to Respondent No. 3. These correspondences clearly show that the Petitioner No. 1 was made aware of the intention of the Respondent No. 3 to initiate proceedings under the IBC well before the press release issued by Respondent No. 1. The Respondent No. 3 has been purposely dragged into the present proceedings before this Hon ble Court, as otherwise it would not have been possible for the Petitioner No. 1 to achieve its ulterior object. From the aforesaid, it is evident that no case has been made out by the Petitioners against the Respondent No. 3 in the captioned petition. In light of the aforesaid, the captioned petition is required to be dismissed qua the Respondent No. 3 with e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent No.1 has produced on record a communication dated 15.6.2017 addressed to the respondent No.2 andforwarding a direction of same date to initiate insolvency resolution process singly and jointly with other lenders against the petitioner. This direction nowhere discloses any classification and, therefore, there is no reason to comment upon such communication and direction in any manner whatsoever because otherwise it is in accordance with law. 23. The respondent No.1 is relying upon the minutes of High Level Joint Lenders Meet held on 22.6.2017 (page 930) contending that there is reference of insolvency proceedings and, thereby petitioner was aware about initiation of insolvency proceedings and, therefore, there is material suppression by the petitioner when it is stated in paragraph 18 of the petition that none of the meetings with the Bankers ever discussedin decision or proposal by the Bankers to ignorethe restructuring process and initiate proceedings before the NCLT under the Code. On such issue, hot and detailed arguments are submitted emphasizing that when petitioner has suppressed material facts, petition needs to be thrown out at threshold and summarily without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs independent of such direction, as already issued herein above, now, it would be for the NCLT to determine that whether such petition is to be entertained or not. 26. Few of the citations, of which reference is made herein above while recording their oral submissions were relied upon by both the sides but considering the facts and circumstances as discussed herein above, I do not think that any of the citations except which are discussed hereinafter needs any further discussion herein since the principle laid down in such decision is well settled and it does not change the conclusion which is based upon the facts and circumstances also as discussed herein above. 27.In case of Barium Chemicals Ltd. (Supra) though it is confirmed that an order passed in exercise of powers under Statute is liable to be quashed on the ground of malafide, dishonesty or corrupt purpose, petitioner has failed to show any such ground except arbitrariness or discrimination. But as already discussed, it is difficult to assign allegation of arbitrariness with impugned press release. The emphasis on opinion or necessity can be looked into by NCLT because discussion on factual merits would otherwise pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitioner who claims about 1% of the total debts of the respondent was not entertained. Therefore, such judgment would not be helpful to the petitioner because the factual details are different in the present case. 33. In case of Ionic Metaliks (Supra), Division Bench of this Court has already confirmed that the Standard Chartered Bank being a private Bank is not amenable to the writ jurisdiction of this Court and, therefore, learned Senior Counsel and Advocate General Mr.Kamal Trivedi for such Bank is right in submitting that petition needs to be dismissed so far respondent No.3 Bank is concerned. Otherwise also, when no relief is granted in favour of the petitioner disposing the petition, there is no need to discuss furthermore on such issue. 34.In Tirumala Tirupati Devasthanams (Supra) and U.P. Sales Tax Service Association (Supra), it is held that writ of prohibition cannot be issuedwhen the Court or Tribunal proceeded to act within their jurisdiction, however, it is also made clear that it can be issued when such authority proceeds to act in violation of rules of natural justice or in contravention of fundamental rights. Therefore, this petition is to be disposed of, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Judge of Bombay High Court. 38. Similarly, I am not discussing following judgments in detail because considering the facts and circumstances emerging from the record, I do not wish to enter into further scrutiny or discussion so far as suppression of material facts is concerned, more particularly, for the reasons that petition is though disposed of, not solely on the ground of suppression of material facts and, therefore such issue is not much material at this stage. (a) Arunima Baruah v. Union of India reported in 2007(6) SCC 120 (b) S.J.S. Business Enterprises (P) Ltd. v. State of Bihar, reported in 2004(7) SCC 166 (c) Prestige Lights Ltd. v. State Bank of India, reported in 2007(8) SCC 449 (d) S.P. Chengalvaraya Naidu v. Jagannath reported in 1994 (1) SCC 1 39. However, even after considering all such submissions and perusing supporting documents and materials in support of such submissions, so also considering the statutory provisions, which is not declared ultra vires till date, I am of the opinion that: 1) Filing of insolvency proceedings would be a decision of the concerned person, who is entitled to file such application and, therefore, to that extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the power of issuing such direction is available to the RBI u/s.35(AA) and (AB) and, therefore, such sections needs to be referred and scrutinized properly, which reads as under:- 35(AA) Power of Central Government to authorise Reserve Bank for issuing directions to banking companies to initiate insolvency resolution process: The Central Government may by order authorize 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. 35(AB) Power of Reserve Bank to issue directions in respect of stressed assets: (1) Without prejudice to the provisions of section 35A, the Reserve Bank may, from time to time, issue directions to the banking companies for resolution of stressed assets. (2) The Reserve Bank may specify one or more authorities or committees with such members as the Reserve Bank may appoint or approve for appointment to advise banking companies on resolution of stressedassets. 7) The bare reading of Section 35(AA) makes it clear that the RBI is authorised to issue directions to initiate insolvency reso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, under the provisions of the Insolvency and Bankruptcy Code, 2016 10) It is emphasized that in fact the Central Government has authorised the RBI to issue such direction, but while doing so the condition is that RBI has to consider necessity to initiate insolvency resolution process in respect of a default and, therefore, there must be a consideration of necessity of filing insolvency proceeding. Thereby, in other words, it is submitted that only because of such directions by Central Government or RBI, insolvency resolution process is not to be initiated mechanically, but before initiating such process, the RBI must consider the necessity to do so and for such consideration, there must be some substance and there must be speaking order after affording reasonable opportunity to the concerned litigant. 11) Several Judgment are cited in support of all such submissions which are dealt with separately and referred in paragraph while recording submissions of the concerned litigants. However, none of such citation confirms that an administrative order requires hearing and reasons may be disclosed for such decision. It may be recollected here that if there is any representation ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said that direction by RBI or filing of petition by respondents No.2 and 3 is unwarranted or arbitrary. However, as already discussed herein above, filing of petition is different from admitting or allowing the petition and to that extent, this Court has issued notice to ascertain, affirm and reconfirm the position that it would be solely at the discretion of the adjudicating authority either to admit the petition and to proceed further in accordance with law or to refuse to admit the petition. It is also clear that such decision of the adjudicating authority, would be a judicial determination and, therefore, such authority has to deal with the rival submissions and factual details on the subject before taking any decision. Thereby, such adjudicating authority cannot be considered as mere rubberstamp authority at the hands of RBI or any other institution. In view of above facts, the petition needs to be disposed of with certain observations when petitioner is not entitled to any relief/s as prayed in this petition. 12) However, before concluding the petition, one has to deal with the submission of the petitioner that considering the provisions of Insolvency and Bankruptcy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for couple of years, its NPA was more than ₹ 32,000 Crores in last year and more than ₹ 31,000 Crores in previous year. It is also clear that when total debt is more than ₹ 45,000 Crores, there is no option, but to leave the issue at the discretion of the lenders to take appropriate steps in accordance with law, thereby, without interference of this Court under the constitutional mandate. However, at the cost of repetition, it is made clear that factual details and on-going process of restructuring plan and other details would be taken care of by NCLT before taking any decision on merits. 40. Conclusion:- (A) The Respondent No. 1 RBI has to be careful while issuing press releases; it must be in consonance with the Constitutional Mandates, based upon sound principles of Law, but in any case should not be in the form of advise, guidelines or directions to judicial or quasijudicial authorities in any manner what so ever; (B) Since the press release is referring the earlier press release dated May 22, 2017, and since in such press release there is reference of S4A - Scheme for Sustainable Structuring of Stressed Assets, which is also introduced on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s obvious that adjudicating authority may though proceed in accordance with Law, there should not be undue pressure on it by administration and period of pendency of present petition can certainly be considered as reasonable ground to count the time limit from the date of receipt of writ of this order. (H) So far factual details of Petitioner Company with reference to its activities and exercise of restructuring through JLF is concerned, it would be appropriate not to enter into any determination on such point since that would be the subject matter before the Adjudicating Authority under IBC (i.e. NCLT) and therefore it is left open for it to consider it for its determination in accordance with Law, to avoid any prejudice to either party by discussion and determination on any such issue at this stage by this Court, where core issue is whether there is reasonable classification by the RBI and not that whether insolvency proceedings should be admitted or continued or not. Therefore, relief in terms of para 7(d) cannot be granted. (I) For the same reason, issue of suppression of material facts or false statement is not much material at this stage because to decide that informati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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