Skip to main content

Blog # 13. Hon’ble Gujarat High Court raps RBI for giving Directions to NCLT

The Hon'ble Gujarat High Court today rebuked the Reserve Bank of India for asking the National Company Law Tribunal in its June 13 directive to give priority to the insolvency proceedings against companies with huge debts.
It also questioned the functioning of the central bank.
The bench of Justice S G Shah came down heavily on the RBI for stating in its press release dated June 13, 2017 that the Insolvency and Bankruptcy Code (IBC) proceedings against companies with outstanding dues of more than Rs 5,000 crore “will be accorded priority by NCLT.”
Essar Steel had moved the high court challenging the RBI order to banks.
The court also questioned the “functioning” of the RBI for its decision to issue the press release in which it had directed banks to initiate insolvency proceedings against defaulting companies.
“The 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 quasi-judicial authorities in any manner what so ever,” the court said in its order.
Further reacting to the central bank’s submission that it has no document on record based on which the decision to issue press release was taken, the court said, “This goes to show the manner in which the RBI is functioning, in as much 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,” it added.
The court interpreted RBI’s statement in its press release that “such cases (for insolvency proceedings) will be accorded priority by the NCLT” that the tribunal “has to give priority to cases filed by the directives of RBI against the cases, which are filed by other creditors or petitioners before the NCLT.”
The RBI even tendered an apology to the court saying that the statement was made due to “poor drafting” of the press release, and even issued corrigendum on July 8, to delete the line.
Through in a press release dated June 13, the RBI had directed banks to launch IBC proceedings against companies with outstanding dues of more than Rs 5,000 crore, and for other NPAs, banks should finalise resolution plans in the next six months.
During its submissions, the central bank had apologised from the court for issuing that statement in the press.

Essar Steel had moved the high court seeking the court’s direction to quash the RBI’s direction to the banks to initiate insolvency proceedings against it.

Comments

Popular posts from this blog

Blog # 26. Concept of Real Income under the Income Tax Act, 1961

  What is Income ? Before understanding the concept of Real Income, it shall be important to go through the the term “Income” and “Real”. Income is defined under S.2(24) of the Income Tax Act, 1961(Hereinafter referred as “the Act”). The definition as provided under the Act is an inclusive definition so as to cover up all the usual as well as unusual items, however it certainly does not define it in a way that we can be said it to be precise. The same can be understood by various Judge Made Laws. The first and the lead amongst them is a Privy Council Judgment in the case of Kamakshya Narain   Singh CIT 11 ITR 513 (PC)         Facts The assesse was a “Raja” gave mining lease and He received payments by way of royalty for coal mines leased out to various lessees. The case of the Assessee was that this royalty income received by the Assessee was nothing but the recoupment of the resources which shall be exhausted by the end of the lease and thus the same was not income bu

Blog # 20. S.53A of the Transfer of Property Act, 1882 and Related Laws

Section 53A of the Transfer of Property Act. 1882 is as under :- “53A. Part performance. – Where any person contracts to transfer for consideration any immovable property by writing signed by him or on his behalf from which the terms necessary to constitute the transfer can be ascertained with reasonable certainty, and the transferee has, in part performance of the contract, taken possession of the property or any pat thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has performed or is willing to perform his part of the contract, then, notwithstanding that [***] where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons

Blog # 28. Principles of Natural Justice In Indian Constitution

In The Constitution of India, nowhere the expression Natural Justice is used. However, golden thread of natural justice sagaciously passed through the body of Indian constitution. Preamble of the constitution includes the words, ‘Justice Social, Economic and political’ liberty of thought, belief, worship... And equality of status and of opportunity, which not only ensures  fairness in social and economical activities of the people but also acts as shield to individuals liberty against the arbitrary action which is the base for principles of Natural Justice. Apart from preamble Art 14 ensures equality before law and equal protection of law to the citizen of India. Art 14 which strike at the root of arbitrariness and Art 21 guarantees right to life and liberty which is the fundamental provision to protect liberty and ensure life with dignity. Art 22 guarantees natural justice and provision of fair hearing to the arrested person. Directive principles of state Policy specially Art 39-A tak