In Brief
A batch of petitions challenged the constitutional validity of Sections 35AA and 35AB of the Banking Regulation Act, 1949, and an RBI circular requiring banks to initiate insolvency proceedings against certain defaulters. The Supreme Court held that the circular was issued beyond the statutory authority of Section 35AA and failed to comply with mandatory procedural requirements, particularly Section 45L(3). The Court declared the circular ultra vires and consequently void, holding that insolvency proceedings triggered solely by the impugned circular were invalid. The petitions were allowed, and the circulars and resulting proceedings were quashed.
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