The RBI told the Supreme Court that the inter-creditor agreement (ICA) aimed at helping debt defaulters avoid bankruptcy proceedings requires the approval of 66% of lenders and not all of them, backing the plan that had been drawn up at the behest of the finance ministry.
Rakesh Dwivedi, senior advocate appearing on behalf of the RBI, clarified that after execution of ICA, all lenders in a consortium don’t have to approve it. The RBI also told the SC that banks could have continued with various resolution processes that were being discussed before February 12 last year, when a circular issued by the regulator had scrapped such mechanisms.
This seems to contrast with the RBI’s previous stand in cases in the Allahabad and Madras high courts. In a case filed by Infrastructure Leasing & Financial Services in the Madras High Court last year, the RBI had argued that if a restructuring scheme had not been implemented before February 12, 2018, then it became null and void. Governor Shaktikanta Das had said last month that “there is no proposal on the table seeking modifications to the February 12 circular”.