IBC Section 227: Power of Central Government to notify financial service providers, etc

Section 227 of Insolvency and Bankruptcy Code, 2016: Power of Central Government to notify financial service providers, etc

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Notwithstanding anything to the contrary examined in this Code or any other law for the time being in force, the Central Government may, if it considers necessary, in consultation with the appropriate financial sector regulators, notify financial service providers or categories of financial service providers for the purpose of their insolvency and liquidation proceedings, which may be conducted under this Code, in such manner as may be prescribed.

Legal Commentary & Landmark Judgments: Section 227

Section 227 empowers the Central Government, in consultation with financial sector regulators, to notify Systemically Important Financial Service Providers (FSPs) for resolution under the Code.

Non-Obstante Regulatory Gateway: Operates notwithstanding anything contained in the Code; enables the Central Government to bring designated financial service providers within the CIRP and liquidation framework.
Mandatory Consultation with Regulators: Notifications must be issued in consultation with the appropriate financial sector regulator (such as the Reserve Bank of India).
Specialized Rules and Modifications: Allows application of the Code with modifications, enabling regulators (e.g. RBI) to initiate CIRP, nominate administrators, and constitute advisory committees.

Key Landmark Precedents:

Reserve Bank of India v. Dewan Housing Finance Corporation Ltd. (DHFL) (NCLT / NCLAT / Supreme Court 2021): The landmark resolution of DHFL under Section 227 r/w FSP Rules, 2019 established that massive non-banking financial companies (NBFCs) can be successfully resolved under the Code with RBI oversight.
Swiss Ribbons Pvt. Ltd. v. Union of India (2019) 4 SCC 17: Affirmed that Section 227 provides essential statutory flexibility to address systemic financial contagion in the banking and shadow-banking sectors.

Courtroom Practice & Strategic Litigation Guidance:

Individual creditors cannot directly file a Section 7 or Section 9 petition against a financial service provider; under Section 227 and the FSP Rules, insolvency can only be triggered on an application moved by the appropriate financial regulator (such as RBI).