Statutory insolvency remedy prevails over banking circulars when debt, default, and a complete section 7 application are shown

RBI circulars issued under the Banking Regulation Act, 1949 did not curtail a financial creditor's statutory right to invoke section 7 of the Insolvency and Bankruptcy Code, 2016. The 13 June 2017 circular applied only to identified accounts, and the 12 February 2018 circular took effect after the section 7 application had already been filed. Once debt, default, and a complete application were shown, the Adjudicating Authority was required to admit the insolvency petition. The circulars therefore did not bar initiation of the corporate insolvency resolution process, and the appeal failed.

---

---

Issues: (i) Whether the Reserve Bank of India circulars dated 13 June 2017 and 12 February 2018 barred a financial creditor from invoking section 7 of the Insolvency and Bankruptcy Code, 2016 before the prescribed timelines.

Analysis: The Banking Regulation Act, 1949 empowers the Reserve Bank of India to issue directions for resolution of stressed assets, but those directions were held not to control or curtail the statutory remedy under the Insolvency and Bankruptcy Code, 2016. The circular dated 13 June 2017 applied only to identified accounts, while the circular dated 12 February 2018 came into effect after the section 7 application had already been filed. The right of a creditor to initiate corporate insolvency resolution process was treated as a statutory right under a complete code, and the Adjudicating Authority was required to admit a complete application once debt and default were shown.

Conclusion: The circulars did not bar the section 7 application, and the appeal failed.

Final Conclusion: The statutory insolvency remedy prevailed over the relied-upon banking directions, and the dismissal left the admission of the insolvency application undisturbed.

Ratio Decidendi: Administrative or regulatory circulars issued under the Banking Regulation Act, 1949 cannot override the statutory right of a financial creditor to initiate insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 once debt and default are established and the application is otherwise complete.

---