The Supreme Court (SC) on Monday provided a huge relief to thermal power projects worth Rs 2 trillion that were facing the threat of insolvency. The apex court held a 12 February 2018 circular of the Reserve Bank of India (RBI), which ordered banks to classify companies as 'stressed' if they default on loans even for a day, to be 'ultra vires'. The SC said that the circular that applied to numerous defaulting assets in power, sugar, shipping and companies in other sectors to be beyond the RBI's legal powers.
A detailed copy of the judgement is awaited.
The February 12 circular allowed 180 days for the debt resolution of companies with loan accounts over Rs 2,000 crore, failing which the asset would have to be taken to the National Company Law Tribunal (NCLT) for insolvency action. The 180-day deadline got over on 31 August 2018. However, most companies took the legal route to avoid being dragged to NCLT