RBI sees overlap of power in NCLAT giving IL&FS relief

Mumbai: The National Company Law Appellate Tribunal (NCLAT) on Tuesday admitted the Reserve Bank of India’s plea seeking modification of the tribunal’s February 25 order in which it had said that the accounts of IL&FS group companies would not be classified as non-performing asset (NPA) by banks without prior approval.

Asking the RBI not to “make it a prestige issue”, the NCLAT observed that the central bank cannot restrict the appellate tribunal from passing orders in the issue.

The NCLAT asked the central bank to clarify if its norms and powers under the NPAs hamper successful resolution.

The RBI argued that the February 25 order would lead to a “situation where statutory instructions/ guidelines/circulars issued by it the Reserve Bank of India become infructuous”.

The RBI is seeking modification of the order passed by the appellate tribunal, which has provided a moratorium on repayment of loans regarding the accounts of IL&FS and its over 300 group companies.

During the proceedings, RBI’s counsel said that there was an overlap of power on the issue.

Hearing the case of debt-ridden Infrastructure Leasing & Financial Services (IL&FS), the two-member bench headed by Justice S.J. Mukhopadhyaya asked, "If the affected lenders have not moved to the NCLAT, why is the RBI before us?”

On February 25, the NCLAT bench headed by Justice Mukhopadhyay had passed an order, which said: “...we make it clear that due to non-payment of dues by the Infrastructure Leasing & Financial Services Ltd or its entities including the ‘Amber Companies’, no financial institution will declare the accounts of Infrastructure Leasing & Financial Services Ltd. Or its entities as NPA without prior permission of this Appellate Tribunal.”