The Supreme Court on Tuesday quashed the RBI circular of last year that pertains to the provisions for declaring a company bankrupt even on a one-day overdue.

The bench headed by Justice R.F. Nariman said, “We have declared the RBI circular ultra vires.”

Reserve Bank of India (RBI) on February 12, 2018 had issued a circular saying that lenders have to provide for resolution plan within 180 days in case of large account of ₹2,000 crore and above.

It said that if a resolution was not found by August 27, Non Performing Asset (NPA) accounts should be sent to bankruptcy courts.

However, during the pendency of the matter, the apex court on September 11 last year asked banks to maintain status quo and not to initiate insolvency proceedings against loan defaulting companies.