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TMI Blog2018 (3) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... ationalized. In view of the policy declared by the RBI on 12 February 2018, since the scheme itself has been withdrawn, any direction for implementation and enforcement of the said scheme, cannot be issued. This court cannot be unmindful of the fact that the RBI has withdrawn all the schemes relating to the financial restructuring, by declaring new financial policy on 12 February 2018. The new policy appears to have been declared by RBI for the reason that the NPA, in the Nationalized banks, have touched almost 8 lakhs crores. In the instant matter also, the financial exposure of the Petitioner company is more than ₹ 4000 crores, as has been recorded above, the financial policies and the financial matters, falling within the exclusive jurisdiction of the RBI, need not be scrutinized by the Court, since the Court do not possess required expertize in the financial and economic field. - Writ Petition (Lodging) No. 56 of 2018 with Notice of Motion (Lodging) No. 21 of 2018 in Writ Petition (Lodging) No. 56 of 2018 - - - Dated:- 5-3-2018 - R.M. BORDE AND R.G. KETKAR, JJ. Mr. Janak Dwarkadas, Sr. Adv. a/w Mr. J.P. Sen, Sr. Adv. a/w Mr. Rahul Pandey i/by Mr. Akash Menon f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction Plan (CAP) for operationalizing the framework. The JLF guidelines also prescribed that the lenders can formulate and sign an agreement, which may be called JLF Agreement, incorporating the broad rules for functioning of JLF. It also prescribed that, while JLF formation and subsequent corrective actions will be mandatory in the accounts, having aggregate exposure of ₹ 1000 millions and above, in the other cases also the lenders will have to monitor the asset quality closely and take corrective action for effective resolution as deemed appropriate. The JLF is expected to explore various options to resolve the stress in the account. There are various options under the CAP by the JLF, such as rectification, restructuring, recovery etc. 5. In the case of Petitioner company, the JLF held first meeting on 17 March 2017 wherein, it was decided and agreed to hold back NCLT proceedings till April 2017. In the meeting of JLF held on 7 September 2017, the debt resolution (restructuring scheme) of the Petitioner No.1 JNIL was approved with super majority. 6. As per the directions issued by the RBI on 28 August 2017, any resolution plan finalized out side IBC, it will be subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice of RBI and sought ratification of appointment of two CRAs made by it. It is the contention of the Petitioner that the RBI did not instruct the bank, not to proceed with the appointment or forthwith discontinue the same or wait for the appointment of two CRAs to be made by the RBI. The Petitioner contends that the appointment of the CRAs was made correctly by the SBI, from amongst the final accredited CRAs, approved by the RBI. The RBI, on the contrary, on 7 December 2017, confirmed the credit opinion obtained from CARE and directed the SBI to obtain a fresh rating from IRRPL. SMERA has assigned long term rating of BBB and short term rating as A 3 respectively to the continued debt (residual debt) of the Petitioner No.1, which signify moderate safety. The JLF, in its meeting dated 16 October 2017, decided that the lead bank should approach on behalf of the JLF to Respondent No.1 and get ratification of the appointment of CRAs. The CRA, CARE on 14 November 2017 assigned BBB credit rating in respect of residual debt of Petitioner No.1 signifying moderate degree of safety. 10. In the meeting of the JLF dated 12 December 2017, the issues relating to the RBI dispensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative and was handed over to the SBI. 12. According to the Petitioner, how the conditions having been met before the deadline of 13 December 2017, there is no other option to the RBI except to allow the JLF to implement MRA. The three conditions namely, the promoters contribution to the satisfaction of JLF has been brought in and the satisfaction of JLF cannot be substituted by any other entity, including RBI or the Court. It is contended that MRA has already been implemented and as such, there is no need to approach the IBC and thirdly, the CRAs have certified the residuary debt of the Petitioner company as investment grade and as such, the relief as prayed for by the Petitioner, deserves to be granted. 13. The contentions raised by the Petitioner in the Petition have been controverted by the Respondent RBI and it is vehemently contended that the MRA has not been implemented and that the Petitioner has failed to comply with all the conditionalities i.e. (i) bringing in upfront contribution by the promoters, (ii) the credit ratings of accredited CRAs, that the residuary debt of the company is of investment grade (iii) the CRA appointed by the RBI i.e. IRRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision of the JLF; (iii) participating banks have been mandated to implement the decision of JLF without any additional conditionality; (iv) the Boards of the bank were advised to empower their executives to implement JLF decisions without further reference to them. In respect of CRAs, with a view to prevent rating shopping or any conflict of interest, the RBI stated that it is exploring the feasibility of rating assignments being determined by the RBI itself and paid for from a fund to be created out of the contribution from the banks and the Reserve Bank. 16. In a corrigendum issued to the earlier press release dated 12 May 2017, the RBI declared on 13 June 2017 that the IAC recommended that the banks should finalize a resolution plan within six months and in cases where a viable resolution plan is not agreed upon within six months, the banks should be required to file insolvency proceedings under the IBC. It is contended that since the resolution plan has not been finalized and implemented, the RBI directed the SBI to file insolvency proceeding under the IBC and those have already been presented. The time line as per the directives of RBI was thus, 13 Dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmit to have rating from CARE and SMERA. It is further recorded that the promoters of the company have now agreed to bring in promoters contribution upfront in the form of cash, conversion of unsecured loan brought by the promoters or transferring equity of the company by promoters to the lenders to compensate for their sacrifice as per extent RBI guidelines. The restructuring process involves conversion of debt into equity which requires approval from the Company's Board approval from shareholders, which requires 21 days prior notice and in principal approval from BSE/NSE. The approval process involves time period of 45 days to 60 days. It was therefore, requested to grant extension of time limit till 31 January 2018 for implementation of restructuring package out side IBC. It is thus, clear that the promoters did not bring in their contribution within prescribed time limit nor the restructuring package outside the IBC was implemented. The RBI on 7 December 2017, informed the SBI that all the required conditions must be fully met by 13 December 2017, failing which the bank should initiate insolvency proceedings against the identified company by 31 December 2017. The RBI issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ives issued by the RBI prescribe that MRA shall be signed by all the parties. In the instant matter, two lending banks have admittedly not signed the MRA. In the event, any bank refuses to sign, must exit in accordance with the policy. In the instant matter, two non signing lending banks have not exited in accordance with the procedure. The contention of petitioners that the non signing banks have voted in favour of the CAP in the meeting of JLF, in itself does not amount to compliance of the directives of the RBI. (iii) the third and most important requirements relating to bringing promoter's contribution upfront and personal guarantees to be provided by the promoters, has not been complied with by the Petitioners. It is a matter of record that the Petitioner upfront contribution was only to the extent of ₹ 15 Crores out of ₹ 100 crores. The Petitioner did not bring in, the promoters contribution before the deadline prescribed by the RBI i.e. before 13 December 2017. The minutes of the meeting of the JLF held on 12 December 2017, clearly record that the promoter's contribution was not complete, even as late as, 12 December 2017, the conversion of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not the function of the Courts to sit in judgment over matters of economic policy and it must necessarily be left to the expert bodies. In such matters, even experts can seriously and doubtlessly differ. Courts cannot be expected to decide them without even the aid of experts. ( Peerless General Finance and Investment Co. Limited Anr. Vs. Reserve Bank of India (1992) 2 SCC 343). It would also be useful to record the observations in paragraph Nos. 37 and 38, which are as under 37. In Shri Sitaram Sugar Company Limited Vs. Union of India with U.P. State Sugar Corporation Ltd. Vs. Union of India [1990] 3 SCC 223 this Court observed as under: (SCC pp. 255 56, para 57) Judicial review is not concerned with matters of economic policy. The Court does not substitute its judgment for that of the legislature or its agents as to matters within the province of either. The Court does not supplant the feel of expert by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of resolution is also provided under Chapter II of the Insolvency and Bankruptcy Code, 2016. The corporate debtor or a financial creditor or an operational creditor can initiate corporate resolution process in view of Sections 6 and 7 of the IBC. An operational creditor may also approach for insolvency resolution under Section 8 of the IBC. There is a time limit prescribed for insolvency resolution process, so also a declaration of moratorium and public announcement is provided under Sections 13 and 14 of the IBC. During the pendency of the insolvency resolution proceedings, in order to manage the affairs of the corporate debtor interim resolution professionals can be appointed, who are expected to manage the assets, finances and operation of the corporate debtor, in a professional manner. Section 20 of the IBC provides that the interim resolution professional shall make an endeavour to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern. The interim resolution professionals are also empowered to constitute a committee of creditors after collation of all claims received against the corporate deb ..... X X X X Extracts X X X X X X X X Extracts X X X X
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