Section 7 insolvency petition based solely on an invalid RBI circular was treated as non est and not maintainable.

A Section 7 insolvency application filed solely in compliance with an RBI circular later declared ultra vires could not be sustained as an independent invocation of the Insolvency and Bankruptcy Code. The record showed that the decision to commence CIRP was taken only under that circular, so once the circular was struck down, the basis for the application disappeared. On that reasoning, the petition was treated as non est and the insolvency application was not maintainable.

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Issues: Whether the application under Section 7 of the Insolvency and Bankruptcy Code, 2016 was maintainable when it was found to have been filed solely in pursuance of the RBI circular that had been held invalid, and whether such proceedings were liable to be treated as non est.

Analysis: The petitioning financial creditor sought commencement of CIRP on the basis of default, but the record of consortium meetings showed that the decision to file before the Adjudicating Authority was taken in compliance with the RBI circular dated 12.02.2018. The subsequent judgment striking down that circular as ultra vires meant that actions taken only under it could not survive. Since the petition was found to have been initiated exclusively in that background, the application could not be sustained as an independent invocation of the insolvency remedy under the Code.

Conclusion: The application under Section 7 was not maintainable and was liable to be dismissed.

Final Conclusion: The insolvency petition failed because it was treated as having been triggered solely by the invalid RBI circular, leaving no sustainable basis for admission of CIRP.

Ratio Decidendi: A Section 7 insolvency application initiated solely in pursuance of a circular that has been declared ultra vires is non est and cannot be proceeded with as an independent action under the Code.

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