Tuesday, 27 February 2018

Ongoing CIRP updates in Bhushan Steel Ltd, Bhushan Steel & Power Ltd and Bhushan Energy Ltd

Liberty house approach NCLT for rejection of its bid:- Interest of creditors at stake






                                                                                                 By- Soujanya Ketharaj
                                                                                       4th year BA.LLB 
                                                                            Intern at Veda Legal Advocates and Solicitors
                                                                                                       

                                                                                                                

  Sequence of Events


New Delhi, July 13, 2017

The National Company Law Tribunal (NCLT) issued notices to Bhushan Steel Ltd and Bhushan Steel and Power Ltd over insolvency proceedings initiated by their lenders State Bank of India and Punjab National Bank.
The Principal Bench of the NCLT headed by its President Justice M.M.Kumar had directed Bhushan Steel and Bhushan Steel and Power Ltd to file their reply. SBI is claiming to recover Rs 4390,75,41,611 from Bhushan steel along with USD 49,684,877 as foreign currency loan.

Both the petitions were filed under the Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, where the financial creditor initiated insolvency proceedings with a claim filed in FORM C (PROOF OF CLAIM BY FINANCIAL CREDITORS) [Under Regulation 8 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016].


New Delhi, July 19, 2017


The National Company Law Tribunal reserved order on insolvency pleas against Bhushan Steel as well as Bhushan Steel and Power. A two-member bench headed by Justice M.M.Kumar reserved its order on SBI petition for initiating insolvency proceedings against Bhushan Steel Ltd and a similar plea by PNB against Bhushan Steel & Power Ltd.
During the proceedings, Counsel appearing for Bhushan Steel argued that 65 per cent loan shown by the SBI is for working capital and hence it is not a defaulter. However, this plea was rejected.

Meanwhile the Reserve Bank of India (RBI) issued directives to the banks to file insolvency proceedings against defaulters. (RBI Directives) (Refer to Para 16 of final order dated 26th July 2017)


New Delhi, July 26

The NCLT gave go-ahead to banks to start insolvency proceedings against Bhushan Steel Ltd and Bhushan Steel & Power Ltd (BSPL) to recover the loans which the companies have defaulted on.

Allowing the pleas filed by the lead bankers, SBI and PNB, NCLT appointed interim resolution professionals (IRPs) and directed the companies' managements, officials and promoters to assist them in the proceedings.
NCLT appointed Vijay Kumar V Iyer as IRP for Bhushan Steel Ltd and Mahender Kumar Khandelwal for Bhushan Steel & Power Ltd.


"All personnel connected with the corporate debtor, its promoter or any other person associated with the management of the corporate debtor are under legal obligation to extend every assistance and cooperation to the IRP as may be required by him in managing the affairs of the corporate debtor," court said.
NCLT further said that any objection with regard to amount would be maintainable before the committee of creditors.
The tribunal, in two separate orders, also rejected debtors' argument questioning the role of RBI, which had issued directives to the banks to file insolvency proceedings against 12 defaulters.

"We may observe in the passing that issuance of direction by RBI on June 30, 2017 can not be termed illegal because there is adequate power conferred by the banking regulation act by amendment of section 35 to issue directions to the bank being a regulator entitled to do so," NCLT observed.
NCLT did not agree with the submission that steps like restructuring are part of external process, which is beyond the scope of the Insolvency and Bankruptcy Code.


New Delhi, December 19, 2017


The NCLT directed initiating insolvency proceedings against Bhushan Energy Ltd after admitting a plea from SBI.
A two-member bench of NCLT appointed Navneet Kumar Gupta as the interim resolution professional (IRP) to initiate insolvency proceedings.
Bhushan Energy Ltd, the corporate debtor, had a default of Rs 494,09,47,034.76 as on October 31, 2017.


New Delhi, February 26, 2018

Following the rejection of its bid for acquiring Bhushan Power and Steel, UK-based Liberty House filed a case at the NCLT, elaborating as to why it wants its bid to be opened.

The Committee of Creditors had on Wednesday rejected the bid of Liberty House to acquire Bhushan Power and Steel Ltd, leaving Tata Steel and JSW Steel in the race for taking over the assets of the bankrupt firm, a source said.

"Committee of creditors (COC) in a meeting has rejected the bids of Liberty House (of the UK) because the company submitted the bids after the last date of submission date which was February 8," opined by the Senior advocates as the IBS process isa strictly time bound process.

Whereas Senior Advocate Abhishek Manu Singhvi on behalf of Tata Steel has objected to the application contending itself to be the successful applicant.

Senior Advocate Arun Katpalia appeared for the Resolution Professional and Senior Advocate Ramji Srinivasan appeared for the CoC.

Liberty House had submitted the bid on Tuesday.

In the COC meeting the bids of Tata Steel and JSW Steel were disclosed and the detailed terms and conditions of the bids were disclosed to the lenders, the source said.

Bhushan Power and Steel owes about Rs 45,000 crore to its lenders.

When contacted, Resolution Professional (RP) Mahender Kumar Khandelwal had declined to comment on the developments.

According to the source, while Tata Steel offered Rs 17,000 crore to the lenders as upfront amount and Rs 7,200 crore for operations of Bhushan, JSW made an offer of Rs 11,000 crore to the lenders and Rs 2,000 crore for the operations of the beleaguered power firm.

The COC will now meet on March 6 to take the process forward, including declaration of the highest bidder.


**All the views expressed above are personal comments of the author and does not form any sort of legal opinion** Viewers are requested to refer to orders passed by the Tribunal.
_______________________________________________________________
“You take care of your client we are here to look after you”.

For other conveniences stay tuned at corporate laws and insolvency updates knowledge forum (New Corporate Law TreatiseNCLT.in and download the app NCLT.in from Google play store for more virtuous features which will be meritorious for your profession. 





Friday, 23 February 2018

The Reserve Bank introduces Ombudsman Scheme for Non-Banking Financial Companies





As announced in the Monetary Policy Statement of February 7, 2018, the Reserve Bank of India (RBI) today launched the Ombudsman Scheme for Non-Banking Financial Companies (NBFC) vide Notification dated February 23, 2018 for redressal of complaints against NBFCs registered with RBI under Section 45-IA of the RBI Act, 1934. The Scheme will provide a cost-free and expeditious complaint redressal mechanism relating to deficiency in the services by NBFCs covered under the Scheme. The offices of the NBFC Ombudsmen will function at four metro centres viz. Chennai, Kolkata, Mumbai and New Delhi and will handle complaints of customers in the respective zones.
To begin with, the Scheme will cover all deposit-taking NBFCs. Based on the experience gained, the RBI would extend the scheme to cover NBFCs having asset size of Rs. One Billion and above with customer interface.
The Scheme provides for an Appellate mechanism under which the complainant/NBFC has the option to appeal against the decision of the Ombudsman before the Appellate Authority.
The complete Scheme is available on RBI's website.




Manner of achieving Minimum Public Shareholding



The Securities and Exchange Board of India (“SEBI/Board”) vide its circular no. SEBI/HO/CFD/CMD/CIR/P/43/2018 dated February 22, 2018 prescribed the additional method for achieving Minimum Public Shareholding (MPS).

On November 30, 2015 the SEBI issued Circular No. CIR/CFD/CMD/14/2015 on the Manner of achieving minimum public shareholding, which allowed for various methods that may be used by a listed entity to achieve compliance with the minimum public shareholding requirements mandated under rules 19(2) (b) and 19A of the Securities Contracts (Regulation) Rules, 1957 (“the SCRR”) read with regulation 38 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.



With a view to further facilitate listed entities to comply with the minimum public shareholding requirements, the SEBI issue the following additional methods:


(a) Open market sale: Sale of shares held by the promoters/promoter group up to 2% of the total paid-up equity share capital of the listed entity in the open market, subject to 5 times average monthly trading volume of the shares of the listed entity;


(b) Qualified Institutions Placement: Allotment of eligible securities through Qualified Institutions Placement in terms of Chapter VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Conditions for open market sale:

(a) the listed entity shall, at least one trading day prior to every such proposed sale, announce the following details to the stock exchange(s) where its shares are listed:


(i) the intention of the promoter/promoter group to sell and the purpose of sale;

                       (ii) the details of promoter(s)/promoter group, who propose to divest their                                       shareholding;

(iii) total number of shares and percentage of shareholding proposed to be divested; and

(iv) the period within which the entire divestment process will be completed.


(b) The listed entity shall also give an undertaking to the recognized stock exchange(s) obtained from the persons belonging to the promoter and promoter group that they shall not buy any shares in the open market on the dates on which the shares are being sold by promoter(s)/promoter group as stated above.


(c) The listed entity, its promoter(s) and promoter group shall ensure compliance with all applicable legal provisions including that of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.


Hence, in order to achieve the minimum level of public shareholding mandated under rules 19(2)(b) and rule 19A of the Securities Contracts (Regulation) Rules, 1957, a listed entity shall adopt any of the following methods :-


                  (i) Issuance of shares to public through prospectus;

                  (ii) Offer for sale of shares held by promoters to public through prospectus;

(iii) Sale of shares held by promoters through the secondary market in terms of Circular reference No. CIR/MRD/DP/18/2012 dated July 18, 2012;

(iv) Institutional Placement Programme (IPP) in terms of Chapter VIIIA of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

(v) Rights Issue to public shareholders, with promoter/promoter group shareholders forgoing their entitlement to equity shares, that may arise from such issue;

(vi) Bonus Issues to public shareholders, with promoter/promoter group shareholders forgoing their entitlement to equity shares, that may arise from such issue;

(vii) Sale of shares held by promoters/promoter group up to 2% of the total paid-up equity share capital of the listed entity in the open market, subject to conditions specified under this Circular;

(viii) Allotment of eligible securities under Qualified Institutions Placement in terms of Chapter VIII of Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

(ix) Any other method as may be approved by the Board on a case to case basis. For this purpose, the listed entity may approach the Board with appropriate details to obtain prior permission. The Board would endeavor to communicate its decision within 30 days from the date of receipt of the

proposal or the date of receipt of additional information as sought from the listed entity.


Thursday, 22 February 2018

Removal of Re-appointed Independent Director




The Ministry of Corporate Affairs (“MCA”) vide its order dated 21st February, 2018 clarified that re-appointed Independent Director can be removed by the company by passing Special Resolution.

Section 152(2) of the Companies Act, 2013 provides that every director (including an independent director) shall be appointed by the company in General meeting. 

Presently section 149(10) of the Companies Act 2013 provides that subject to the provisions of section 152, an independent director shall hold office for a term up to five consecutive years on the Board of a company, but shall be eligible for re-appointment on passing of a special resolution by the company.

Section 169(1) states that a company may, by ordinary resolution, remove a director, not being a director appointed by the Tribunal under section 242, before the expiry of the period of his office after giving him a reasonable opportunity of being heard.

Various stakeholders have suggested to the MCA difficulties regarding proper monitoring and implementation of corporate governance requirements in companies and in order to strengthen corporate governance process and for reviewing section 169 of the said Act, which, inter-alia, deals with the removal of independent directors.

Presently an independent director is re-appointed for second term under sub-section (10) of section 149, only by way of a special resolution; such independent director can be removed by an ordinary resolution and not by a special resolution.

In order to remove above said difficulty, and to ensure better corporate governance in companies, and balancing of powers of the board of the company, the MCA have made the following amendment:

In the Companies Act, 2013, in section 169, in sub-section (1)-

(i) before the proviso, the following proviso shall be inserted, namely:-

“Provided that an independent director re-appointed for second term under sub-section (10) of section 149 shall be removed by the company only by passing a special resolution and after giving him a reasonable opportunity of being heard:"

(ii) in the existing proviso, for the words "provided that", the words "Provided further that" shall be substituted.

Friday, 16 February 2018

Daily Cause List: National Company Law Tribunal







The Cause Lists are schedule of cases to be heard by the courts on the following day(s). Every forum has its own causelist and sometimes one has to struggle down to look at every forum’s cause list.

Chuck off all the efforts, here is the list of all the National Company Law Tribunal.  Cause list, check out the listing of your matters in all the forums (“Tribunal” or "NCLT") under one table. No need to bother yourself to go to every column of different tribunal to just check out the listing of the matter.


View and download Cause List of National Company Law Tribunal Benches


National Company Law Tribunal 
Principal Bench

New Delhi II
New Delhi III
Registrar NCLT
Ahmedabad bench
Allahabad bench
Bengaluru bench
Chandigarh bench
Chennai bench
(Court I)
Chennai bench
(Court II)
Guwahati bench
Hyderabad bench
Kolkata bench
(Court I)
Kolkata bench
(Court II)
Mumbai bench
(Court I)
Mumbai bench
(Court II)

“You take care of your client we are here to look after you”.

For other conveniences stay tuned at corporate laws and insolvency updates knowledge forum (New Corporate Law TreatiseNCLT.in and download the app NCLT.in from Google play store for more virtuous features which will be meritorious for your profession. 



Disclaimer: Information provided in the blog is for general reference purposes only.  The author is not liable for any error or omission in presentation of the information. New Corporate Laws Treatise www.nclt.in All rights reserved.  

NCLT.IN IS A PRIVATELY OWNED AND OPERATED WEBSITE AND SHOULD IN NO WAY BE DEEMED TO BE CONNECTED WITH THE GOVERNMENT OF INDIA OR ANY OF ITS MINISTRIES OR DEPARTMENT OR THEIR OFFICIAL WEBSITES. THE INFORMATION OR LINKS TO ANY INDIAN GOVERNMENT/ COURTS/ TRIBUNALS WEBSITES ARE PURELY FOR READY REFERENCE OF THE SITE USERS.

RBI Strictly Advise All Banks to Accept Coins







The Reserve Bank of India (“RBI”) provides facility for exchange of notes and coins. All the banks are strictly advised that the bank branches should not refuse to accept small denomination notes and / or coins tendered at their counters.

Even though an unusual situation is prevailing within different parts of the country with traders, shopkeepers, vendors, are refusing to accept coins following rumors that the government has banned them. On the other hand the bankers have also refused to accept them on the pretext of not having enough space to store it in the bank and also because it takes more time to count the coins. The other reason offered by the bank officials for not accepting the coin is that it is time consuming and disrupts other banking operations.

In order to provide safeguards against these situations the RBI issue notification on February 15, 2018 “Acceptance of coins” by banks.

The RBI strictly advises Chairman, Managing Director, and Chief Executive Officer of all banks to direct all their branches to accept coins of all denominations tendered at their counters either for exchange or for deposit in accounts.

The RBI Further advises that it will be preferable to accept coins, particularly, in the denominations of Rupee 1 and 2, by weighment.  However, accepting coins packed in polythene sachets of 100 each would perhaps be more convenient for the cashiers as well as the customers. Such polythene sachets may be kept at the counters and made available to the customers. A notice to this effect may be displayed suitably inside as also outside the branch premises for information of the public.

The RBI advises to Controlling Offices to pay surprise visits to the branches and report the position of compliance in this regard to the Head Office. The reports may be reviewed at the Head Office and prompt remedial action taken, wherever necessary. Any non-compliance in this regard shall be viewed as violation of instructions issued by the Reserve Bank of India and action including penal measures as applicable from time to time, may be initiated.



Tuesday, 13 February 2018

NEGOTIATE LIKE A LEADER



                                                                                                     By- Kunal Ahuja
                                                                                      Veda legal advocates and solicitors

“ In business as in life, you don’t get what you deserve you get what you negotiate “
                                                                                                         (- Chester L. Karrass)



In life, every day is a series of negotiation whether we realize it or not from deciding on who will clean up the house or who will pick up the children, from hiring someone to crack a deal on what terms, deciding a location while planning a trip and much more. In every relationship whether personal or professional, we need to go through certain negotiations. Negotiating skills are very important if we look at it from a commercial point of view as every deal made, contract signed, business combinations taking place, buying or selling a product, functioning in different countries etc.

But not everyone is good at discussing things or lacks convincing power or restrain themselves to talk out of fear.



As rightly said, “Let us never negotiate out of fear but let us never fear to negotiate.”
                                                                                                               (-John F. Kennedy)




Many of us face some or the other problems while negotiating with the other person.
Some major questions one frequently ask himself/herself while negotiating are:-

What should I start with?
Am I sounding too rude?
Is this the right time to put up this question?
Where will this discussion end?
Am I able to convey properly?
I hope the other side doesn’t get this statement wrong/offensive?
Do I need to tell him this?
I hope I am not sounding too selfish
Why is he not getting along?
Am I leading this negotiation on the right track?
Is it going to be productive?
What if I am not able to bargain well?



These questions are infinite as we cannot determine the mindset of the person sitting on the other side but we can work on to change it by applying proper techniques and by moving ahead through proper steps.



Not everyone is good in negotiations or getting things worked out in their favor but this does not mean we can’t build them. With the proper skills and steps anyone can become a good negotiator and no doubt it is one of the most important tool these days which help people understand each other’s needs and give what they want, we don’t realize but by giving them what they need we are one step ahead of getting what we want.



Negotiating with the right set of skills makes you a good leader



Build trust
Building trust is the foremost step one should keep in mind while making a good relation and which helps in bringing a sense of comfort while discussing. Making the other person trust you is one thing which makes the conversation easy and lessens the probability of the opponent judging you. If the other person trusts you he/she is more likely to open up quickly and share what they want out of this deal or negotiation otherwise it takes quite long to break the ice and understand what the exactly another party is seeking out of this negotiation. Having a certain amount of transparency is quite helpful in maintaining trust but not too much.

Don’t show those cards which can pose you as weak in this discussion.

Focus on the needs of another person
In today's era, everyone clearly knows how to further their own interest and ascertain their benefits first. During negotiation one should focus on the needs of the other person and should show how those needs can be fulfilled by this negotiation. Knowledge of the product or the deal is of no use for them if it cannot meet their needs or is not beneficial for them at all.

If the other person feels the importance of his needs in the on going discussion he/she will show more interest and will try to figure out ways to talk about more on same and how fast it can be done. All you have to do is to show the opponent a WIN-WIN situation out of this negotiation.


Listen more A good negotiator should know how to listen more rather than talking as listening allows you to get the appropriate catch and let you know the whole story of the other’s side without putting too much effort. To know the needs of the other person and to play on those needs it is important that one should listen properly and to everything the other party has to share. Put a question, maintain a silence for a moment and let the other party concede.


Assert and express your needsYou should never forget your interest, should know how to put it on the other side of the table, don’t afraid to ask what you want. Remember successful negotiators believe that everything is negotiable or there is nothing which cannot be negotiated.

One should always know how to tell the other person what they need without being aggressive i.e. in a non-threatening way. Being assertive means putting your needs in front of the other party and showing due respect for other’s needs as well. There should be nothing which implies disregard to the needs of the opponent. Don't forget in a negotiation you are representing yourself so the other party has to give you the thing you want and then only can take one thing from you, therefore feel free to express what you feel and what you want out of this discussion.



Look for common good not area of conflicts When two parties have agreed to discuss then there must be some common grounds, even very less, for which they have agreed to try to settle it. One should know the seek of common interest for both of them and then proceed further. If the parties agree to take stance on the common grounds which gives the negotiation a positive start only then you should move forward to accelerate negotiation and try to talk about the things the other party needs to adjust or deal with the specific or individual needs of the parties. By looking into the common grounds and not conflicts the negotiation is seen from a positive perspective by both the parties and they become more willing to settle it further and feel productive outcome out of the negotiation.


Have the courage to walk away

Remember that both the parties have some interest in concluding and if the negotiation does not end with a positive result it's not only your failure or you will be the one losing but the other party also has something to lose, so be careful before you agree and if you don't feel like agreeing then don’t. Never show what will you lose if the negotiation does not end well rather show to the opponent what will they lose if they do not collude and ask them to imagine what could be the situation if they walk out from this discussion, they will realise the importance of the conclusion for their benefit and will show their inclination towards settlement. Walking away is not walking away from the solution but a way of asking the other party to negotiate more.

Don't consider walking away as an option but never feel hesitated to walk away if the settlement is against you.


Don't take anything personally Negotiations often fail as the parties forget their professional responsibility and get sidetracked by their personal feelings and concerns which are not at all related to the subject matter of the negotiation. Remember you are negotiating on behalf of a very big management of your company not for personal reasons. Don't get affected by the other side’s behavior and never take anything personally during negotiation as the party on the other side is acting solely out of professional accountability.


Above mentioned were the key rules to be kept in mind while negotiating.

Here are some professional tips to make the negotiations more effective and constructive

How to ask a question 
  • I have something to ask if you allow me? 
  • I am willing to understand this matter fully, so tell me? 
  • What you have to say on this …? 
  • Let me come up with this? 
  • Here’s something I have been wondering about? 
  • I am stuck can you help me out here? 

How to avoid anything
  • This is a very interesting point it deserves a clear answer. 
  • Good point! I need to gather my thoughts to answer that. 
  • I am glad you brought that up. 
  • Now here what the problem is. 
  • You raise very interesting points. 
  • I need to ponder the ramifications before I speak. 


How to emphasize a point
  • Please take special note of this point. 
  • I think you might understand the importance of this. 
  • I have to say this as it has significant value in it. 
  • Let me be very clear about this. 
  • Please pay attention! 
  • This seems very important to discuss. 

How to convince

  • You got what you wanted and even more. 
  • I think this is the best deal which you can avail. 
  • Let’s get it done. 
  • I think you deserve it. 
  • Take a call go ahead this is best for you. 
  • Leaving it will be insane. 
  • This seems worth your efforts and time. 



How to bargain, or open the path for a new / expanded discussion

  • There has to be a mid way for both of us. 
  • Meet me in the middle. 
  • We can work out something better. 
  • The proposal is good, but I think we should discuss more. 
  • We both need WIN-WIN. 
  • I have got a better deal, sorry! (makes the other party move from his position out of fear of losing out on the deal) 
  • You will need to lean forward a bit. 


How to reject a proposal
(You can use this to walk away or slow down the progress of the deal, especially if the other person is being overeager, asking you to skip steps or cut corners)
  • Unfortunately, this is not the best for me. 
  • I can’t accept it right now. 
  • I think we should not move forward with this. 
  • I would love to say yes, but I can’t get it past my superior. 
  • I apologize, but I can’t accept this. 


How to call for a compromise
  • Compromise is the best way to go. 
  • I am willing to listen to you if you do the same. 
  • We have to arrive at a compromise. 
  • Let’s do it together. 
  • Let’s get this done once and for all. 
  • Let’s not stretch it further and get over with it. 
  • You need to cooperate with me, please. 
  • Let’s start it from now. 









Relaxation in the provisions relating to levy of Minimum Alternate Tax (MAT) in case of companies against whom an application for corporate insolvency resolution process has been admitted under the Insolvency and Bankruptcy Code, 2016






The existing provisions of section 115JB of the Income-tax Act, 1961 (‘the Act’), inter alia, provide, that, for the purposes of levy of Minimum Alternate Tax (MAT) in case of a company, the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account shall be reduced from the book profit.

In this regard, representations have been received from various stakeholders that the companies against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the Insolvency and Bankruptcy Code, 2016 (‘the IBC’), are facing hardship due to restriction in allowance of brought forward loss for computation of book profit under section 115JB of the Act.

With a view to minimize the genuine hardship faced by such companies, it has been decided, that, with effect from Assessment Year 2018-19 (i.e. Financial Year 2017-18), in case of a company, against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under section 7 or section 9 or section 10 of the IBC, the amount of total loss brought forward (including unabsorbed depreciation) shall be allowed to be reduced from the book profit for the purposes of levy of MAT under section 115JB of the Act.
Appropriate legislative amendment in this regard will be made in due course.

New Corporate Laws Treatise www.nclt.in All rights reserved.

Monday, 12 February 2018

Relief to MSME Borrowers registered under Goods and Services Tax (GST)



The Reserve Bank of India (“RBI") vide its notification dated February 07, 2018 granted relief to Micro Small and Medium Enterprise (“MSME”) Borrowers registered under Goods and Service Tax (“GST”)



Relief for MSME Borrowers registered under Goods and Services Tax (GST)

Presently, banks and NBFCs in India generally classify a loan account as Non-Performing Asset (NPA) based on 90 day and 120 day delinquency norms, respectively. It has been represented to us that formalisation of business through registration under GST had adversely impacted the cash flows of the smaller entities during the transition phase with consequent difficulties in meeting their repayment obligations to banks and NBFCs. As a measure of support to these entities in their transition to a formalized business environment, it has been decided that the exposure of banks and NBFCs to a borrower classified as micro, small and medium enterprise under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, shall continue to be classified as a standard asset in the books of banks and NBFCs subject to the following conditions:

(i) The borrower is registered under the GST regime as on January 31, 2018.

(ii) The aggregate exposure, including non-fund based facilities, of banks and NBFCs, to the  borrower does not exceed ` 250 million as on January 31, 2018.

(iii) The borrower’s account was standard as on August 31, 2017.

(iv) The amount from the borrower overdue as on September 1, 2017 and payments from the borrower due between September 1, 2017 and January 31, 2018 are paid not later than 180 days from their respective original due dates.

(v) A provision of 5% shall be made by the banks/NBFCs against the exposures not classified as NPA in terms of this circular. The provision in respect of the account may be reversed as and when no amount is overdue beyond the 90/1201 day norm, as the case may be.

(vi) The additional time is being provided for the purpose of asset classification only and not for income recognition, i.e., if the interest from the borrower is overdue for more than 90/1202 days, the same shall not be recognised on accrual basis.