DHARANI SUGARS AND CHEMICALS LTD vs UNION OF INDIA — T.C.(C) No. 66/2018

Summary of T.C.(C) No. 000066/2018 - Dharani Sugars and Chemicals Ltd. v. Union of India Court Decision The Supreme Court declared the RBI Circular dated 12.02.2018 (regarding stressed asset resolution) ultra vires Section 35AA of the Banking Regulation Act, 1949 and void. Key Holdings Constitutional Validity: Sections 35AA and 35AB passed constitutional scrutiny—not manifestly arbitrary and sufficiently guided by statutory preamble and provisions. Ultra Vires Finding: The RBI Circular exceeded its authority because: 1. Specific Power Requirement: Section 35AA authorizes directions only in respect of "a default" (specific defaults of specific debtors), requiring Central Government authorization 2. General Application Invalid: The circular applies uniformly to all debts ≥₹2000 crore generally, not to specific individual defaults 3. Absence of Central Government Approval for General Directive: While the 05.05.2017 notification authorized directions on "a default," it did not authorize blanket directives applicable to categories of debtors Core Reasoning - Section 35AA (specific power to trigger insolvency) is separate from Sections 35A/35AB (general power for other resolution methods) - General provisions cannot override specific provisions when statutory scheme clearly separates them - The circular's mandatory 180-day timeline applicable to all large debts violates the requirement for case-specific directions - Expression "issue directions to banking companies generally" present in Section 35A is conspicuously absent in Section 35AA, indicating specific case-by-case application only Consequence All proceedings initiated under the impugned circular, including insolvency filings under Section 7 of the Insolvency Code triggered solely by this circular, are declared non-est (void ab initio). This case analysis is maintained by casestatus.in based on publicly available court records.