Independent Power Producers (IPP) may move courts individually this week seeking stay on RBI circular regarding stressed assets. This comes a week after the Allahabad High Court denied interim relief to power producers association against National Court of Law Tribunal (NCLT) proceedings.
Over 30 power producers with a combined capacity of approximately 40,000 MW owe the banks nearly ₹1.7 lakh cr. However the bankruptcy and insolvency proceedings are unlikely as it would require banks to take about 70% haircut. The asset value could also deteriorate.
Allahabad High Court- hearing
The RBI released a circular asking banks to formulate resolution plans for stressed assets on February 12. As per the circular, if a resolution plan is not agreed upon in 180 days (August 27) then banks can initiate bankruptcy proceedings for stressed accounts above ₹2,000 crore. However a plea was filed by the association of power producers to put a stay on this circular which the Allahabad High Court denied last week.
So banks could either draw up resolution plans in 15 days now or initiate insolvency proceedings.
Flexibility under RBI circular
‘There was a certain degree of flexibility under the RBI circular to mould the resolution plan. A reference to the NCLT will set the process back to square one and will further delay a resolution. Once cases are referred under the NCLT, promoter involvement and interest may abate since, in most cases, the existing promoters may be ineligible to participate in the resolution under the NCLT,’ Amit Kapur, Senior Partner, J Sagar Associates, said to BusinessLine
Projects already referred to NCLT
A dozen project projects including Lanco Infratech, Athena Energy’s 1,200 MW Chhattisgarh plant, Kakrapalli thermal power project of East Coast Energy in Andra Pradesh, KVK Nilachal, Ind-Barath Madras, Krishna Godavari and others have already been referred to the NCLT.