Section 7 insolvency maintainability upheld where RBI directions were tied to specific defaults under statutory authorisation.

Section 7 insolvency proceedings were treated as maintainable where the RBI directions flowed from the Central Government's notification under section 35-AA of the Banking Regulation Act, 1949. The tribunal record indicated that the corporate debtor's account was included in the specific list referred for resolution, and the later communication dated 28.8.2017 was treated as a direction tied to identified defaults rather than a general instruction outside the statutory framework. On that basis, the objection that Central Government authorisation was lacking failed, and the dismissal of the section 7 petition was found unsustainable; the connected review appeal also became infructuous once the main order was set aside.

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Issues: Whether the financial creditor's section 7 insolvency application was maintainable when it was founded on the Reserve Bank of India's directions issued after the Central Government notification under section 35-AA of the Banking Regulation Act, 1949.

Analysis: The Central Government notification dated 5.5.2017 authorised the Reserve Bank of India to issue directions to banking companies to initiate insolvency resolution in respect of a default under the Insolvency and Bankruptcy Code, 2016. The record showed that the account of the corporate debtor was included in the specific list referred for resolution, and the later letter of 28.8.2017 was treated as a direction in relation to identified defaults, not as a general direction dehors the statutory framework. On that basis, the Tribunal concluded that the proceedings under section 7 were not vitiated for want of Central Government authorisation. The order dismissing the section 7 petition was therefore unsustainable. The connected review appeal became otiose once the main dismissal order was set aside.

Conclusion: The maintainability objection failed and the appeal was allowed in favour of the appellant.

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