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Supreme Court bench headed by Justice RF Nariman, Justice Indu Malhotra directed twelve cases pertaining to insolvency and bankruptcy, pending in the High Courts of Madras , Gujarat, Allahabad, Delhi to be transferred to the Supreme Court. The petitions would then be disposed off by November 14. In the petition there was a challenge against the circular issued by the Reserve Bank of India which had given the borrowers180 days time to clear their dues. The circular further makes it mandatory for the banks to disclose the defaults even if the interest repayment is overdue. In case of failure to find resolution within the stipulated time period, the defaulting company has to refer the case to insolvency courts as other modes of resolution have been abolished like CDR, SDR, S4A, JLF.
The circular has been criticised at different levels as it fails to draw distinctions between various forms of stressed assets from different industrial sectors. The circular also fails to differentiate between genuine and wilful defaulters. Most petitioners fall in the category of genuine defaulters claiming that they could not pay back due to huge loan burdens. To end this they rely on 31 Members Committee of Parliament Energy. The report discussed the non performing assets in the electricity sector, the role of RBI, the need for consideration of various factors that are responsible for assets to become NPA. The circular has also been criticised for giving a 180 day timeline for debts over 20 million. The court has clarified that there would be no curtail on the powers of the financial creditors under section 7 of the Insolvency and Bankruptcy Code.
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