In a temporary relief to the stressed companies, over 34 of which are thermal power producers, the Supreme Court asked the Reserve Bank to maintain a status quo until November. The top court has also decided to hear all petitions challenging the RBI's February 12 circular. As nine of these 34 power companies are nearing resolution outside the National Company Law Tribunal, they will benefit the most from the SC order. The SC order will also buy the stressed shipping and sugar companies, which had approached the top court against the order, some more time.
The Allahabad High Court had refused to give interim relief to power producers facing insolvency proceedings after the Reserve Bank of India's debt resolution plan deadline ended on August 27. However, the RBI gave 15 more days to banks to hire legal counsels and resolution professionals, which gave them more time to resolve these NPAs and approach the higher court. Major companies that had filed cases in different courts across the country include RKM Power, IL&FS, Essar Power and GMR Energy. The RBI's 15-day deadline ended on Tuesday.
"The order has provided a great relief to stressed assets in the power sector. This would provide time for bankers to finalise resolution plans for projects of about 13 GW in their final stages and the High-Level Empowered Committee to submit its report on corrective actions," Business Standard quoted AK Khurana, director general, Association of Power Producers, as saying.
As per the RBI's February-12 circular, the over 70 defaulting companies had been given six months starting from March, following which financial creditors were supposed to move the NCLT against them. The RBI circular came into effect on March 1 and the 180-day deadline concluded on August 27.
There are about 34 stressed power projects and the combined value of their outstanding loans is about Rs 1.74-lakh crore. Banks believe the insolvency process could depreciate the value of these assets and want more time to resolve them. They are also trying their best to find out solutions before such NPAs are referred to NCLT. The State Bank of India recently said about 7-8 power sector projects, including KSK Mahanadi, Prayagraj Power, JP Power Venture, etc, worth Rs 17,000 crore are expected to be resolved soon as lenders are nearing consensus on these projects.