DNA Money Edit: Reserve Bank should have looked before leaping

It is perhaps for the first time that a Reserve Bank of India (RBI) circular was contested in the high court.

The directive in focus was the June 13 circular which directed the banks to take 12 NPA (non-performing asset) cases on a priority basis to the National Company Law Tribunal (NCLT).

The bone of contention was whether the central bank could direct a judicial authority like the NCLT on which cases it should take on a priority basis.

The central bank has clearly overstepped its jurisdiction to meander on to the turf of the judiciary, which was frowned upon by the Gujarat High Court.

Reserve Bank, in response, had to modify its circular, erasing the sentence that asked the NCLT to take shortlisted defaulting companies on a priority basis.

Bankers said if only the RBI had brainstormed with banks on how to deal with the NPA situation perhaps the regulator may not have had to eat its words.

Agreed that Gujarat High Court dismissed Essar Steel’s pleas and allowed banks to proceed with the resolution process under the tribunal, but not before taking the central bank to task.

The high court asked the Reserve Bank of India to be careful while framing press releases, which must be in consonance with the constitutional mandates based on the sound principles of law, and in any case should not be in the form of advice, guidelines or directions to judicial and quasi-judicial organisations and that RBI should see that all its schemes are offered without discrimination.