RBI urges Hyderabad High Court to lift stay on Anrak Insolvency

The Reserve Bank of India has urged the Hyderabad High Court for seeking to permit The State Bank of India to go ahead with insolvency proceedings against Anrak Aluminium, an Indo-UAE joint venture.

SBI legal counsel VK Sajith has confirmed the RBI’s petition but refused to comment on the matter terming it sub judice. The company had defaulted on INR ?3,242 crores of loans and US$96 million of external commercial borrowings to the SBI-led lender’s consortium.

In March, the high court had stayed the proceedings before the National Company Law Tribunal (NCLT), after Anrak Aluminium approached the court saying that it had already entered into a one-time settlement with lenders. But the banking regulators challenged the case claiming that neither the company formulated any resolution plan before the deadline nor the lenders approved any resolution plan.

The company had also contested the directives given by the RBI to SBI on December 27 to initiate insolvency proceedings, stating that the resolution plan was placed and implemented without considering the fact and without the application of mind.

Anrak had also challenged the jurisdiction and authority of the RBI and submitted to the high court that the provisions of Section 35-1 of the Banking Regulation Act only empowered the central bank to issue general directions.  

But arguing against the contentions of Anrak, the banking regulator said: “Framing regulations concerning resolution of bad debts in the financial system is a matter of economic policy, the powers of which vest with Respondents No 1 (RBI) being the regulatory body and expert thereof.”