Insolvency petition based solely on an ultra vires RBI circular was treated as non-maintainable and could not be admitted.

A Section 7 insolvency petition was treated as non-maintainable where the record showed it was initiated exclusively because of an RBI stressed-assets circular later declared ultra vires. Although debt and default were not disputed, the decisive factor was that the consortium minutes treated the circular and its timeline as mandatory, fixed the filing deadline before the Tribunal, and contemplated insolvency only after the resolution process could not be implemented within that framework. As the proceedings were traceable solely to the invalid circular, actions founded on it could not survive and the petition was not fit for admission.

---

---

Issues: Whether the Section 7 insolvency petition was initiated only because of the RBI circular declared ultra vires, and if so, whether the petition was liable to be rejected as non-est.

Analysis: The petitioning bank and the corporate debtor were not in dispute on debt and default. The determinative question was whether the proceedings were independently initiated under the Insolvency and Bankruptcy Code or whether they arose solely from the RBI circular on stressed assets. The minutes of the consortium meeting showed that the lenders treated the circular and its timeline as mandatory, fixed 11.09.2018 as the deadline for filing before the Tribunal, and decided to approach the Tribunal only after the resolution process could not be implemented within that framework. On that basis, the initiation of the petition was found to be traceable exclusively to the circular. Since the circular had already been declared ultra vires and the actions taken under it had been held non-est, proceedings founded only on that circular could not survive.

Conclusion: The petition was held to be non-est and could not be admitted.

---