2019 (1) TMI 727 - AT - Insolvency and Bankruptcy

Initiate insolvency resolution process in respect of a default under the provisions of the I&B Code - Held that - On bare perusal of the 13th June, 2017 and the 12th February, 2018 Circulars, it is clear that they are not applicable in the present case. The 13th June, 2017 Circular only provides directions for initiating Corporate Insolvency Resolution Process under the I&B Code for certain identified accounts . The 12th February, 2018 Circular has come into effect after the filing of the application under Section 7 by the State Bank of India. Therefore, the said Circular is not applicable in the present case. The directions of the Reserve Bank of India also suggest that the Reserve Bank of India never intended to interfere with the statutory remedy of resolution process under the I&B Code . Those Circulars also cannot override the provisions of the I&B Code . The right of the Creditors under the I&B Code for initiation of Corporate Insolvency Resolution Process is a statutory right. The I&B Code is a special enactment passed by the legislature and is a complete Code in itself. The Adjudicating Authority needs only to be satisfied of the existence of a debt and default if any. Once the Adjudicating Authority is satisfied, and the application is complete, then the application is required to be admitted. In the present case, as we find that there is no dispute about debt or default and the same has not been denied by the Corporate Debtor , the present appeal being devoid any merit is dismissed.

Summary

Issues:
1. Interpretation of Banking Regulation Act, 1949 in the context of Insolvency and Bankruptcy Code, 2016.
2. Applicability of circulars issued by Reserve Bank of India on stressed assets and insolvency resolution process.
3. Statutory rights of creditors under the Insolvency and Bankruptcy Code.

Analysis:
1. The appeal involved the interpretation of the Banking Regulation Act, 1949, specifically Sections 35AA and 35AB, in connection with the Insolvency and Bankruptcy Code, 2016. The Appellant argued that the Reserve Bank of India's directions under these sections were binding on Banking Companies, including the Respondent State Bank of India, and should have been followed, rendering the application under Section 7 of the I&B Code not maintainable.

2. The Appellant contended that circulars issued by the Reserve Bank of India on stressed assets and insolvency resolution process were binding on Banking Companies, including the State Bank of India. However, the State Bank of India argued that the circulars did not prevent them from invoking the provisions of the I&B Code before the specified timelines indicated in the circulars. The Tribunal analyzed the circulars dated June 13, 2017, and February 12, 2018, and concluded that they were not applicable in the present case as the latter circular came into effect after the filing of the application under Section 7.

3. The Tribunal reiterated that the right of creditors under the Insolvency and Bankruptcy Code to initiate Corporate Insolvency Resolution Process is a statutory right. The Code is a comprehensive legislation in itself, and once the Adjudicating Authority is satisfied of the debt and default, the application must be admitted. In the case at hand, as there was no dispute regarding the debt or default, and the Corporate Debtor did not deny the same, the appeal was dismissed for lacking merit.

In conclusion, the judgment clarified the interplay between the Banking Regulation Act, 1949, and the Insolvency and Bankruptcy Code, emphasizing the statutory rights of creditors and the binding nature of circulars issued by the Reserve Bank of India.