Limited judicial review of RBI insolvency referral decisions applies where selection is based on objective banking criteria.

Judicial review of the RBI's selection of stressed accounts for insolvency referral is limited where the action is taken under Sections 35AA and 35AB of the Banking Regulation Act, 1949 and rests on objective, expert-driven criteria. The analysis states that such regulatory choices in banking and economic policy will be interfered with only if they are shown to be arbitrary, unreasonable, capricious or mala fide. It further notes that tranche-wise or phased sequencing of referrals is permissible, and that the fact other accounts may also meet similar parameters does not by itself render the selection unlawful or violative of Article 14.

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Issues: Whether the Reserve Bank of India's decision to select the petitioner's account for reference under the Insolvency and Bankruptcy Code, 2016 was arbitrary or unreasonable and therefore violative of Article 14 of the Constitution of India.

Analysis: The challenge was confined to the RBI's selection of certain stressed accounts for insolvency referral. The decision was taken pursuant to the statutory framework under Sections 35AA and 35AB of the Banking Regulation Act, 1949 and was based on an objective, expert-driven classification of large stressed accounts. The Court reiterated that judicial review over such economic and banking policy choices is limited and interference is warranted only where the action is shown to be arbitrary, unreasonable, capricious or mala fide. The petitioner's inclusion in the relevant tranche was found to rest on rational criteria, and the mere fact that other accounts may also have satisfied similar parameters did not make the selection unlawful, since the RBI was entitled to proceed in phases and determine the tranche-wise sequencing of referrals.

Conclusion: The RBI's action was not held to be arbitrary or violative of Article 14, and the challenge failed.

Final Conclusion: The petition was rejected because the RBI's referral decision was upheld as a valid exercise of regulatory discretion founded on objective criteria.

Ratio Decidendi: In matters of banking and economic regulation, a selection decision based on objective criteria and expert assessment will not be interfered with in judicial review unless arbitrariness, unreasonableness, mala fides or capriciousness is established.

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