Independent Power Producers Association of India v. UOI

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The Tax Publishers 2018 TaxPub(CL) 0990 (All-HC) : (2018) 149 SCL 0294 Independent Power Producers Association of India v. UOI INSOLVENCY AND BANKRUPTCY CODE, 2016, --Initiation of liquidation--Writ petition against RBI Circular Direction to initiate insolvency resolution process of stressed assets of power companies----Where outstanding dues of petitioner power company stood above Rs. 2,000 crores, it was a stressed account as per RBI's circular, therefore, no interim relief of staying implementation of RBI circular was to be granted.--In exercise of powers under sections 35A, 35AA and 35AB, RBI issued a circular which mandatorily directed banking company/companies to initiate insolvency resolution process of stressed assets of power companies which were at risk of defaulting under provisions of IBC. Power companies filed writ petition for declaring provisions of sections 35AA and 35AB as ultra vires to the Constitution of India and also sought for quashing of RBI circular. Further, power companies also sought for interim relief of staying implementation of RBI circular. *Held:* The circular provided a resolution plan for a debtor which involved 'restructuring' to be approved by 'all the lenders'. The framework provided a deadline of 180 days for implementation of a resolution plan and if it was not implemented, then lenders had to file insolvency application under the IBC. Further, as per the RBI's new Guidelines (Circular), a stressed account of above Rs. 2,000 crores had to be referred to NCLT, if the default continued beyond 180 days. Since petitioner had been NPA right from 2016 and plans of restructuring had been turned down by creditors whose dues stood at Rs. 9,997 crores, thus, account of petitioner being above Rs. 2,000 crores was a stressed account as per RBI's new guidelines. Hence, no interim relief was granted to the petitioner. Insolvency and Bankruptcy Code, 2016, Section 33, Banking Regulation Act, 1947, Sections 35A, 35AA & 35AB, Constitution of India, 1950, Article 226 *Circulars and Notifications:RBI Circular DBR No. BP.BC.101/21.04.048/2017-18, dt. 12-2-2018Distinguished:Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85Relied:Nawal Kishore Sharma v. Union of India (2014) 9 SCC 329, Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR. 1984 All. 46, Aloo Phul Suhzi Arhati Association v. State of U.P. 2002 ALJ 2587, Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372, Innoventive Industries Ltd. v. ICICI Bank Ltd. (2017) 84 taxmann.com 320 (SC) : (2017) 143 SCL 625 (SC) : (2017) 205 Comp Case 57 (SC) and Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC) REFERRED :* Kalpana Mehta v. Union of India 2018 SCL online SC 512, Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC), R.K Gargv. Union of India(198l) 4 SCC 675, Peerless General Finance & Investment Co. Ltd. v. RBI(1992) 2 SCC 343 and Joseph Kuruvilla Vellukunnel v. Reserve Bank of India AIR 1962 SC 1371 FAVOUR : Against the petitioner A.Y. : IN THE ALLAHABAD HIGH COURT DILIP B. BHOSALE, CJ. & YASHWANT VARMA, J. Independent Power Producers Association of India v. UOI Writ C. Nos. 18170, 23181, 23183 of 2018 27 August, 2018 *Case Review* Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC) ; Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR 1984 All. 46; Aloo Phul Suhzi Arhati Association v. State of UP. 2002 ALJ 2587; Kalpana Mehta v. Union of India 2018 SCL online SC 512; and Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC); followed; Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372; and Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85--distinguished. *Cases Referred to* Kalpana Mehta v. Union of India 2018 SCC Online SC 512; Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC) ; Nawal Kishore Sharmav. Union of India (2014) 9 SCC 329; Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR. 1984 All. 46; Aloo Phul Suhzi Arhati Association v. State of U.P. 2002 ALJ 2587; Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372; Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85; Innoventive Industries Ltd. v. ICICI Bank Ltd. (2017) 84 taxmann.com 320 (SC) : (2017) 143 SCL 625 (SC) : (2017) 205 Comp Case 57 (SC) Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC); R.K Gargv. Union of India(198l) 4 SCC 675; Peerless General Finance & Investment Co. Ltd. v. RBI(1992) 2 SCC 343; and Joseph Kuruvilla Vellukunnel v. Reserve Bank of India AIR 1962 SC 1371. Petitioner by: Abhishek Manu Singhvi, Sajan Poovayya, Navin Sinha, Sr. Advocates Ashish Mishra, Kalpna Sinha, R.P. Kushwaha, Visson Mukherjee, Catherine Ayallore, Milanka Chaudhery, Ashli Cherian and Ameya Misra, learned Advocates Respondent by: Tushar Mehta, Shashi Prakash Singh, Sanjay Kumar Om, learned ASG, Ravi Kadam, Rakesh Dwivedi, Anurag Khanna, learned Sr. Advocate Amit Saxena, Vivek Shetty, Johan Chakshi, Sansriti Pathak, Eklayva Dwivedi, Raghav Dwivedi, Saurabh Singh and Roshni Shukla, learned Advocates ORDER *Dilip B Bhosale, Chief Justice* The first writ petition under Article 226 of the Constitution of India, has been instituted by Independent Power Producers Association of India, for the following reliefs :-- 'A. Issue an appropriate writ, order or direction for declaring the provisions of section 35AA and section 35 AB of the Banking Regulation Act, 1949, as ultra vires to the Constitution of India; B. Issue a Writ of Certiorari or any other Writ, Order or Direction of like nature quashing the Order S.O. No. 1435(E), dt. 5-5-2017 issued under section 35AA of the Banking Regulation Act, 1949, being without the authority of law; SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 2018 TaxPub(CL) 0990 (All-HC) : (2018) 149 SCL 0294

Independent Power Producers Association of India v. UOI

INSOLVENCY AND BANKRUPTCY CODE, 2016,

--Initiation of liquidation--Writ petition against RBI Circular Direction to initiate insolvency resolution process of stressed assets of power companies----Where outstanding dues of petitioner power company stood above Rs. 2,000 crores, it was a stressed account as per RBI's circular, therefore, no interim relief of staying implementation of RBI circular was to be granted.--In exercise of powers under sections 35A, 35AA and 35AB, RBI issued a circular which mandatorily directed banking company/companies to initiate insolvency resolution process of stressed assets of power companies which were at risk of defaulting under provisions of IBC. Power companies filed writ petition for declaring provisions of sections 35AA and 35AB as ultra vires to the Constitution of India and also sought for quashing of RBI circular. Further, power companies also sought for interim relief of staying implementation of RBI circular. Held: The circular provided a resolution plan for a debtor which involved 'restructuring' to be approved by 'all the lenders'. The framework provided a deadline of 180 days for implementation of a resolution plan and if it was not implemented, then lenders had to file insolvency application under the IBC. Further, as per the RBI's new Guidelines (Circular), a stressed account of above Rs. 2,000 crores had to be referred to NCLT, if the default continued beyond 180 days. Since petitioner had been NPA right from 2016 and plans of restructuring had been turned down by creditors whose dues stood at Rs. 9,997 crores, thus, account of petitioner being above Rs. 2,000 crores was a stressed account as per RBI's new guidelines. Hence, no interim relief was granted to the petitioner.

Insolvency and Bankruptcy Code, 2016, Section 33,

Banking Regulation Act, 1947, Sections 35A, 35AA & 35AB,

Constitution of India, 1950, Article 226

Circulars and Notifications:RBI Circular DBR No. BP.BC.101/21.04.048/2017-18, dt. 12-2-2018Distinguished:Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85Relied:Nawal Kishore Sharma v. Union of India (2014) 9 SCC 329, Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR. 1984 All. 46, Aloo Phul Suhzi Arhati Association v. State of U.P. 2002 ALJ 2587, Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372, Innoventive Industries Ltd. v. ICICI Bank Ltd. (2017) 84 taxmann.com 320 (SC) : (2017) 143 SCL 625 (SC) : (2017) 205 Comp Case 57 (SC) and Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC)

REFERRED : Kalpana Mehta v. Union of India 2018 SCL online SC 512, Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC), R.K Gargv. Union of India(198l) 4 SCC 675, Peerless General Finance & Investment Co. Ltd. v. RBI(1992) 2 SCC 343 and Joseph Kuruvilla Vellukunnel v. Reserve Bank of India AIR 1962 SC 1371

FAVOUR : Against the petitioner

A.Y. :

IN THE ALLAHABAD HIGH COURT

DILIP B. BHOSALE, CJ. & YASHWANT VARMA, J.

Independent Power Producers Association of India v. UOI

Writ C. Nos. 18170, 23181, 23183 of 2018

27 August, 2018

Case Review

Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC) ;

Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR 1984 All. 46;

Aloo Phul Suhzi Arhati Association v. State of UP. 2002 ALJ 2587;

Kalpana Mehta v. Union of India 2018 SCL online SC 512; and

Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC); followed;

Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372; and

Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85--distinguished.

Cases Referred to

Kalpana Mehta v. Union of India 2018 SCC Online SC 512;

Bhavesh D. Parish v. Union of India (2000) 26 SCL 454 (SC) ;

Nawal Kishore Sharmav. Union of India (2014) 9 SCC 329;

Umesh Chand Vinod Kumar v. Krishi Utpadan Mandi Samiti AIR. 1984 All. 46;

Aloo Phul Suhzi Arhati Association v. State of U.P. 2002 ALJ 2587;

Goa Judicial Officers Association v. State of Goa 1997 (4) Bom CR 372;

Mahinder Kumar Gupta v. Union of India (1995) 1 SCC 85;

Innoventive Industries Ltd. v. ICICI Bank Ltd. (2017) 84 taxmann.com 320 (SC) : (2017) 143 SCL 625 (SC) : (2017) 205 Comp Case 57 (SC)

Chitra Sharma v. Union of India (2018) 96 taxmann.com 216 (SC) : (2018) 148 SCL 833 (SC);

R.K Gargv. Union of India(198l) 4 SCC 675;

Peerless General Finance & Investment Co. Ltd. v. RBI(1992) 2 SCC 343; and

Joseph Kuruvilla Vellukunnel v. Reserve Bank of India AIR 1962 SC 1371.

Petitioner by: Abhishek Manu Singhvi, Sajan Poovayya, Navin Sinha, Sr. Advocates Ashish Mishra, Kalpna Sinha, R.P. Kushwaha, Visson Mukherjee, Catherine Ayallore, Milanka Chaudhery, Ashli Cherian and Ameya Misra, learned Advocates

Respondent by: Tushar Mehta, Shashi Prakash Singh, Sanjay Kumar Om, learned ASG, Ravi Kadam, Rakesh Dwivedi, Anurag Khanna, learned Sr. Advocate Amit Saxena, Vivek Shetty, Johan Chakshi, Sansriti Pathak, Eklayva Dwivedi, Raghav Dwivedi, Saurabh Singh and Roshni Shukla, learned Advocates

ORDER

Dilip B Bhosale, Chief Justice

The first writ petition under Article 226 of the Constitution of India, has been instituted by Independent Power Producers Association of India, for the following reliefs :--

'A. Issue an appropriate writ, order or direction for declaring the provisions of section 35AA and section 35 AB of the Banking Regulation Act, 1949, as ultra vires to the Constitution of India;

B. Issue a Writ of Certiorari or any other Writ, Order or Direction of like nature quashing the Order S.O. No. 1435(E), dt. 5-5-2017 issued under section 35AA of the Banking Regulation Act, 1949, being without the authority of law;