We are very happy that the Supreme Court has accepted those arguments and have squashed the circular which was nothing but a mandate to send all the projects to bankruptcy court without actually looking at the genuine difficulties, said Ashok Khurana, Director General, Association of Power Producers, in an interview with ETNOW.
A very strong message has come in from the Supreme Court as it strikes down the RBI circular. What is your first reaction?
We welcome the judgement because we were expecting it. My view is the discretion to send projects to NCLT should be the banks decision. You cannot make it mandatory and you cannot do x and y and you must send it to NCLT. Therefore, unless you take the ground realities and genuine difficulties in consideration, you cannot paint all projects with the same brush.
If there are reasons for which the default has occurred and that default is beyond the control of the developers, you cannot blame him and send him to NCLT. There will only be value erosion because the externalities always remain with the project and the new developer faces the same problems. We are very happy that the Supreme Court has accepted those arguments and have squashed the circular which was nothing but a mandate to send all the projects to bankruptcy court without actually looking at the genuine difficulties.
What is your view as the representative of the power producers of India?
We welcome the judgement because the Supreme Court has accepted that you cannot treat all projects alike. Each project has specific circumstances and the discretion to send a project for bankruptcy should vest with the banks board which can assess the ground realities and how the value is to be preserved.
The main question is how to preserve the value of the asset and not the value erosion through NCLT. Therefore, they have taken a call and now it is up to the banks to evaluate each project on its own merits and take a call whether it needs restructuring, what form of restructuring is needed and if not, then whether it is to be referred to NCLT. So, there is no sword hanging over them that after 180 days, you hand over the project to NCLT automatically which was very, very arbitrary with a mandate.
It is the bank which has given the money, it is the banks money and each project was forced to have a haircut of 55-60%. The question is if you do not remove the ground conditions which have caused this stress, the new owner will also face the same issue.
In fact, we quoted to Supreme Court the case of Meenakshi which got sold once at 50% of haircut and after two years, again it was sick because conditions remained the same.
The counter argument to what you said is that bRead More – Source