Finance Minister Arun Jaitley feels the Supreme Court ruling of April 2 will not impact the functioning of the Insolvency and Bankruptcy Code (IBC). In an interview with BusinessLine, he said he would rather wait for the Reserve Bank of India to come out with a fresh set of ideas. “The judgment is procedural and it does not impact the IBC,” Jaitley said.

Elaborating, the Finance Minister said: “I think two things are important here — the IBC’s sanctity has to be maintained and the pivotal position in these matters of the RBI has to be maintained. The government will lend its shoulder to both the things.”

“But I am sure that the RBI, which has the power, will follow the procedure that has been suggested by the Supreme Court, because that is the law that has to be followed. I hope that the RBI will come out with a fresh set of ideas, which will take the current market position into mind and with whatever flexibility is required to the economic need,” he added.

When asked what will happen to the cases pending at the National Company Law Tribunal (NCLT), Jaitley said: “It is a matter of law. Some will exit in any case. There is no bar on the creditors from re-filing, but debts do not disappear.”

On allegations that the promoters will get the upper hand in these situations, Jaitley said: “Not really. As I said, there is no bar on the bankers to move the court. The bankers will use their own discretion. The creditors, where the existing management is capable of reviving... they may give it the benefit of doubt. And where it seems that is not possible then they’ll go as per law.”

Terming the question of whether the government can invoke section 35AA of the Banking Regulation Act a hypothetical situation, Jaitley said: “These days there is a blackout period between the RBI and the government because of the policy. So, it’s only after the RBI makes its position clear that the government will make any comment.” The Section empowers the Centre to authorise the RBI to issue directions to banks to initiate the insolvency resolution process.

The Supreme Court had quashed the RBI’s February 12, 2018 circular on the resolution of stressed assets. This, according to legal experts, will provide the banking system with more flexibility and time in resolving stressed assets.

The RBI circular had mandated referring stressed assets to the NCLT if the banks were not able to implement a resolution plan within 180 days from the date it became overdue — a stringent timeline in the context of the processes that banks were used to.

The Supreme Court ruling said that the RBI only has the legal authority to direct banks to refer specific cases to the insolvency process, and the generic framework laid out in the circular was exceeding the RBI’s authority. The ruling put a question mark over cases related to the recovery of ₹3.8 lakh-crore pertaining to 17 large borrowers, pending at the NCLT.

Fiscal deficit targets

On the economic front, Jaitley brushed aside any apprehensions on whether the government would be able to meet its fiscal deficit targets.

“Not much shortfall is there. Last fiscal we managed to cross ₹10-lakh-crore as income-tax. If we increase over and above this and cross ₹11.50-lakh-crore, it is a big jump. We should normally cross that.”

The Finance Minister did not see much of a problem in achieving the 3.4 per cent fiscal deficit target. “I think we should be able to reach that ... it’s only a matter of couple of days ... you can get the results,” he added.

When asked about the Asian Development Bank lowering its GDP growth projection for India by 40 basis points, Jaitley said: “Let’s just wait for the next couple of months and see how consumption picks up. For instance, in the March GST data, there is a reasonable jump. Let us wait for April data. If you have it over a period then it can be interpreted as a pattern because that indicates both consumption and manufacturing.”

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