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Aircel resolution plan: RBI warns UVARCL

The Reserve Bank of India has warned UV Asset Reconstruction Company (UVARCL) that its certificates of registration could be cancelled if it does not explain by subsequent week why it didn’t inform the insolvency court docket that the regulator had rejected its resolution plan for Aircel at the outset.

The central bank cited the flouting of the norms laid down under the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act and the willful violation of the RBI’s pointers, sources told the Economic Times. According to the Sarfaesi Act, asset reconstruction companies cannot infuse equity into an insolvent company at the resolution stage.

UVARCL has been summoned to answer the RBI’s notice by the end of next week. However, it had already informed the RBI about all steps of the resolution plan, sources told the publication.

The cancellation of UVARCL’s registration at this stage would imply that the resolution plans for bankrupt telcos Reliance Communications (RCom) and Aircel would stand cancelled and set back State Bank of India’s plans to retrieve Rs 12,000 crore loaned to both telcos. While the National Company Law Tribunal (NCLT) has accredited Aircel’s settlement plan, RCom’s proposal has been cleared by the committee of collectors (CoC) and is pending before the tribunal.

“In the show-cause notice, RBI has said that it had rejected the resolution plan of Aircel in October last year and despite that, UVARCL went ahead with it and did not inform the National Company Law Tribunal of the regulatory body’s decision,” a source told the publication.

While clearing UVARCL’s resolution plan for Aircel in June 2020, the NCLT asked the ARC to ship its plan to RBI for approval since ARC’s are regulated by the RBI.

UVARCL then dispatched the NCLT-approved plan to the central bank, which rejected the proposal once more, citing norms under the Sarfaesi Act.

In its notice to UVARCL, the RBI mentioned it had refused permission as early as October 2019, before the NCLT cleared the proposal, the source added. Business Today

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