MUMBAI: State Bank of India has sought an urgent meeting with finance minister Nirmala Sitharaman to request changes to the Sarfaesi Act so as to allow asset reconstruction companies to participate in bankruptcy proceedings, in a bid to save Aircel’s insolvency resolution plan.
The request from the lead lender to the bankrupt mobile operator comes days after UV Asset Reconstruction Company – which has proposed to buy Aircel and most assets of another bankrupt telco Reliance Communications- met the finance minister and sought her intervention in this case.
The Reserve Bank of India had rejected UV Asset Reconstruction Company’s resolution plan for Aircel on the grounds that ARCs cannot infuse equity in an insolvent company at the resolution stage.
“SBI has approached the finance ministry for a hearing on this issue,” an official privy to the development said. “Their request is to consider changes to the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest) Act and bring it at par with IBC (Insolvency and Bankruptcy Code) so as to allow ARCs to act as resolution applicants (RAs) and invest equity in distressed firms,” the person said. “Not allowing ARCs to act as RAs jeopardises several distressed asset resolutions, that is the bank’s stated stance,” the official said.
SBI and UVARCL didn’t respond to ET’s queries as of press time Monday.
RBI’s rejection of Aircel resolution plan brought into focus the conflict between the insolvency law and the Sarfaesi Act on whether an ARC can bid for bankrupt firms or not.
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