RBI’s circular directing bank to take recourse to IBC is ultra vires to section 35AA

Dharani Sugars And Chemicals Ltd. Vs Union of India & Ors. (Supreme Court of India)

Conclusion –

Hon’ble Supreme Court held that RBI Circular directing bank to take recourse to Insolvency and Bankruptcy Code (IBC)  is ultra vires to Section 35AA of the Banking Regulation Act.

Facts –

On 12^th February, 2018, RBI issued a circular and had directed banks to resolve debts over INR 2000 crores within 180 days, failing which the corporate debtor would have to be taken to the National Company Law Tribunal (NCLT) for insolvency action within 15 days from the expiry of 180 days. Further, the Circular mandated that banks will have to disclose defaults even if the interest repayment is overdue by just one day, and will have to put a resolution plan in place within 180 days.

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