Supreme Court
The Supreme Court has clarified that corporate guarantees executed by a corporate debtor in respect of loans advanced to group entities constitute “financial debt” within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016, and the beneficiaries thereof are entitled to be treated as financial creditors. Such claims cannot be rejected merely on the grounds of alleged non-disclosure in financial statements, non-filing of the guarantee documents along with Form C, or objections regarding improper stamping, since non-stamping or insufficient stamping is only a curable defect and does not invalidate the instrument.
The Court further held that where the corporate debtor itself admits execution of the guarantee, and the Resolution Professional has verified the instrument, the NCLT/ NCLAT cannot disregard the claim on speculative grounds relating to timing, disclosure, or procedural production of documents. If the findings of the NCLT and NCLAT ignore such material and reject the claim of a financial creditor, those findings are perverse and liable to be interfered with under Section 62 of the Code.
A Two-Judge Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe observed that a liability arising from a corporate guarantee squarely falls within the ambit of “financial debt” under Section 5(8) of the IBC, and that the amount of any liability in respect of guarantees for money borrowed against payment of interest is a financial debt. It reiterated that a guarantor incurs a coextensive liability with that of the principal borrower and such liability is enforceable in law.
SC: IBC Moratorium Does not Bar Cheque Bounce Cases Against Directors Under NI Act
While dismissing the SLP in favour of Ortho Relief Hospital and Research Centre, the Supreme Court has upheld the ruling given by the Bombay High Court that prior initiation of insolvency proceedings under the IBC, including imposition of moratorium, does not frustrate or bar prosecution of directors/signatories under Section 138 read with Section 141 of the NI Act, because the moratorium under Section 14 and the protection under Section 32A operate only in favour of the corporate debtor, whereas natural persons continue to bear personal penal liability.
A Two-Judge Bench comprising Justice B.V. Nagarathna and Justice Ujjal Bhuyan affirmed the opinion where the High Court had specifically held that the two enactments operate in different spheres and do not intercede each other, and that criminal proceedings under Section 138 of the NI Act are not the kind of proceedings that are required to be kept in abeyance under Section 14 of the IBC insofar as natural persons are concerned.
The Supreme Court has held that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 is governed by Article 137 of the Limitation Act, 1963, and limitation commences from the date of default, i.e., the date of NPA classification. Exclusion of time under Section 60(6) of the Code and under the Covid-19 extension orders must be strictly computed, and if the petition is filed after the expiry of the remaining limitation period, it is barred.
The Court further held that admission of a claim by an IRP/RP during CIRP does not amount to an acknowledgment of liability under Section 18 of the Limitation Act, 1963, because such admission is only an administrative act of collation of claims and does not reflect a conscious and unequivocal admission of subsisting liability by the corporate debtor or its duly authorized representative. Such admission cannot extend limitation for filing a Section 7 petition. Accordingly, the Supreme Court quashed and set aside the impugned judgments of the NCLAT and NCLT
The Division Bench comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe observed that limitation for filing an application under Section 7 of the Code is governed by Article 137 of the Limitation Act, 1963, and begins to run from the date of default, namely the date on which the account is classified as NPA, and not from any subsequent recovery proceeding. Since the accounts were declared NPA on December 06, 2016, the right to file the Section 7 petition accrued on that date itself.
High Court/ NCLAT/ NCLT
The Telangana High Court at Hyderabad Bench has clarified that where a corporate debtor holding project rights through an Special Purpose Vehicle (SPV) undergoes insolvency resolution under the IBC, and the approved resolution plan under Section 31 contemplates transfer of shareholding and control subject to governmental consent, the State’s grant of such consent in furtherance of the approved plan is not a fresh award of State largesse, but an act undertaken within and bound by the statutory framework of the IBC; by virtue of Sections 31 and 238 of the IBC, the resolution plan is binding on all stakeholders, including shareholders and the State, and any inconsistent claims founded on prior contractual arrangements or other laws must yield to the Code.
The Court held that a shareholder of the corporate debtor cannot assert an independent proprietary or contractual right in respect of project assets or leasehold rights outside the corporate entity, since such rights vest in the company as a distinct juristic person, and upon insolvency resolution the extinguishment or dilution of shareholder interest is merely a commercial consequence of the statutory resolution process, constituting procedure established by law, and does not amount to unconstitutional deprivation of property under Article 300A requiring compensation.
The Division Bench comprising the Chief Justice Aparesh Kumar Singh and Justice G.M. Mohiuddin also held that where differential treatment between the erstwhile controlling shareholder and a minority technical/operator entity is based on their distinct legal and functional positions post-CIRP, no violation of Article 14 arises. Further, a resolution applicant selected through the CIRP process cannot be equated with a recipient of State largesse requiring re-tendering, and issues concerning FDI compliance fall for examination by competent regulatory authorities rather than by the writ court in the absence of manifest illegality.
The Allahabad High Court has held that once a resolution plan is approved under Section 31 of the IBC, all claims pertaining to the pre-CIRP period, including electricity and statutory dues, if not filed during CIRP or not forming part of the approved resolution plan, stand extinguished and cannot thereafter be enforced through demand notices or recovery proceedings.
The Division Bench comprising Justice Ajit Kumar and Justice Swarupama Chaturvedi observed that Sections 31 and 238 of the IBC give binding and overriding effect to an approved resolution plan, and therefore all claims, including statutory dues, which do not form part of the approved resolution plan stand extinguished upon its approval. It held that the IBC, being a subsequent and comprehensive legislation, prevails over the Electricity Act, 2003, including Sections 173 and 174 thereof, in case of inconsistency.
The Delhi High Court has ruled that once the statutory period of filing the written statement has elapsed, any subsequent filing of an application under Order VII Rule 11 of the CPC shall not revive the statutory period in any manner whatsoever, and shall not extend the statutory period for filing the written statement.
A Single Judge Bench of Justice Mini Pushkarna observed that the application under Order VII Rule 11 CPC for rejection of the plaint was filed by defendant no. 2 much after the statutory period of 120 days for filing of the written statement had expired. It noted that while a defendant is entitled to file an application for rejection of plaint under Order VII Rule 11 CPC before filing the written statement, the liberty to file such an application cannot be made as a ruse for retrieving the lost opportunity to file the written statement.
Referring to the Supreme Court judgment in R.K. Roja Versus U.S. Rayudu [(2016) 14 SCC 275], the Bench observed that once the statutory period for filing the written statement has already lapsed, subsequent filing of an application for rejection of plaint will not revive such statutory period. Thus, the Bench categorically rejected the plea of defendant no. 2 that its right for filing the written statement ought not to have been closed due to the subsequent filing of the Order VII Rule 11 CPC application.
NCLAT: Flats Allotted Towards Legal Fees Without Disbursement Do Not Constitute ‘Financial Debt’
The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) has held that a belated claim filed by a commercial entity after approval of the resolution plan by the CoC need not be condoned, particularly where admitting such claim would reopen the CIRP contrary to the time-bound scheme of the IBC. Further, where the claimant’s name does not appear in the list of protected allottees forming part of the SARFAESI sale certificate, the corporate debtor cannot be held liable for such claim.
The Tribunal further held that allotment of flats in lieu of legal fees, without any disbursement by the claimant to the corporate debtor, does not amount to a financial debt under Section 5(8) of the IBC. The essential requirement of disbursal against consideration for time value of money remains mandatory, and in its absence the claimant cannot be treated as a financial creditor.
The Division Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the adjudicating authority committed no error in refusing to condone the delay. The appellant was a commercial entity, the resolution plan had already been approved by the CoC before the claim was filed, and the case was governed by the principle that CIRP is a time-bound process and belated claims cannot be permitted to reopen the resolution process.
NCLT: Rupee Value Of Debt Cannot Be Artificially Enhanced Due To Currency Fluctuations
The Ahmedabad Bench of the National Company Law Tribunal (NCLT) has held that for the purpose of determining whether the minimum default threshold under Section 4 of the Insolvency and Bankruptcy Code, 2016 is met in a case involving operational debt denominated in foreign currency, the foreign currency amount must be converted into Indian Rupees with reference to the exchange rate prevailing on the date of the invoice, being the date on which the liability stands quantified and crystallized, and not with reference to the date of default or any subsequent date.
The Division Bench comprising Shammi Khan (Judicial Member) and Sanjeev Sharma (Technical Member) observed that the principal issue was the relevant date for converting foreign currency debt into Indian Rupees for determining the statutory threshold under Section 4 of the IBC, namely whether such conversion should be made with reference to the date of invoice, date of default, or any later date adopted by the Operational Creditor.
The Ahmedabad Bench of the National Company Law Tribunal has clarified that where a statutory authority, during the subsistence of a moratorium under Section 14 of the IBC, directs a bank to place lien on and freeze the bank accounts of the Corporate Debtor, and the bank acts on such direction, such action amounts to execution and enforcement of an order against the Corporate Debtor and is barred by Section 14(1)(a) of the IBC. Since such action directly affects the Corporate Debtor’s assets, going concern status, and the conduct of CIRP, the NCLT has jurisdiction under Section 60(5) of the IBC to intervene and grant relief.
The Division Bench comprising Shammi Khan (Judicial Member) and Sanjeev Sharma (Technical Member) observed that the application was maintainable because the dispute before it was not about the correctness of the Mining Department’s determination of dues, but about the direction issued to IDBI Bank to create a lien and freeze the Corporate Debtor’s bank accounts during the subsistence of the moratorium. It held that such action directly impacted the functioning of the Corporate Debtor as a going concern and inhibited the Resolution Professional from taking control, custody, protection and preservation of the Corporate Debtor’s assets.
The New Delhi Bench of the National Company Law Tribunal (NCLT) has clarified that where no resolution plan is approved by the requisite 66% voting share of the CoC within the prescribed CIRP period, including extensions, liquidation must follow under Section 33(1)(a) of the IBC. The NCLT held that once the CIRP period expires without an approved resolution plan, a separate CoC resolution approving liquidation by 66% voting share is not required for the Adjudicating Authority to order liquidation under Section 33(1)(a).
The Division Bench comprising Bachu Venkat Balaram Das (Judicial Member) and Reena Sinha Puri (Technical Member) observed that the statutory trigger under Section 33(1)(a) of the IBC is the non-approval of a resolution plan within the prescribed CIRP period. Page 6 It noted that despite multiple rounds of Form-G, receipt of resolution plans, negotiations, and re-voting under Regulation 39(3B), no plan secured the requisite 66% voting share before expiry of the CIRP period, including all extensions, on February 13, 2026.
No Auction Without Proof of Sham Transactions: NCLT Restrains Liquidator in Property Dispute
The Mumbai Bench of the National Company Law Tribunal (NCLT) has held that the liquidator cannot proceed to auction any property unless he has cogent evidences that MOU, Allotment Letter and Possession Letter are ingenuine and are subterfuge created to defeat the ownership entitlement of corporate debtor. It clarified that the powers of the Insolvency Professional under Section 18 and Section 25 of the Code, and of the Liquidator under Section 35, extend only to assets owned by the Corporate Debtor. The Code does not empower the RP/Liquidator to take control of assets belonging to third parties or deal with the rights of third parties in assets even if existing in name of the corporate debtor.
The Division Bench comprising Sushil Mahadeorao Kochey (Judicial Member) and Prabhat Kumar (Technical Member) observed that the Society’s maintenance claim and records in the name of the Corporate Debtor were not conclusive evidence that the property belonged to the Corporate Debtor. While the Society may levy dues from the recorded owner, mere recording in the Society’s records cannot conclusively determine ownership, especially where the Applicant’s rights flowed from the registered Development Agreement and were further supported by the MOU, Allotment Letter and Possession Letter, the authenticity of which had not been disputed by the Liquidator.
The Chennai Bench of the National Company Law Tribunal (NCLT) has held that, although Section 60(5)(c) of the Insolvency and Bankruptcy Code, 2016 confers residuary jurisdiction upon the Adjudicating Authority to entertain or dispose of any question of law or fact arising out of or in relation to the insolvency resolution process of the corporate debtor, such jurisdiction cannot be exercised in a manner that defeats the finality attached to a resolution plan approved under Section 31 IBC; once a resolution plan is approved, it becomes binding on all stakeholders and claims not forming part of the resolution plan stand extinguished.
The Division Bench comprising Jyoti Kumar Tripathi (Judicial Member) and Ravichandran Ramasamy (Technical Member) first observed that Section 60(5)(c) IBC confers residuary jurisdiction on the Tribunal to entertain or dispose of any question of law or fact arising out of or in relation to the insolvency resolution process of the corporate debtor. However, the Tribunal expressly held that such jurisdiction cannot be invoked in a manner that defeats the finality attached to a resolution plan approved under Section 31. It reiterated that once a resolution plan is approved by the Adjudicating Authority, it becomes binding on all stakeholders and all claims not forming part of the resolution plan stand extinguished.
The Chennai Bench of the National Company Law Tribunal (NCLT) has clarified that takeover offer under a scheme of arrangement to acquire remaining minority shares under Section 230(11) of the Companies Act, 2013, where shares of non-promoter shareholders are taken over by promoters based on fair valuation prescribed by the Act and applicable rules, cannot be termed as ‘disinvestment’ by a State Government Company.
The NCLT held that a minority shareholder, even if a public sector undertaking, does not have a special right for differential treatment or separate valuation outside the prescribed statutory rules of the Companies Act, 2013, unless such a special right is provided under the Articles of Association or through any other instrument.
The Division Bench comprising Sanjiv Jain (Judicial Member) and Venkataraman Subramaniam (Technical Member) observed that Section 230(12) of the Companies Act provides an opportunity for an aggrieved person to apply to the tribunal in respect of a grievance, if any, in the takeover offer of the company, and this application should be made when the scheme is under consideration by the tribunal. In the present case, the application was filed much after the scheme was approved and implemented.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi has held that a purchaser of shares in a court-monitored liquidation process steps into the shoes of the transferring shareholder and is bound by the rights, obligations, and liabilities of the predecessor, including non-compete clauses contained in a Joint Venture and Share Purchase Agreement. This is strictly applicable when the Articles of Association mandate that a transferee must agree to be bound by such obligations as a condition precedent to the transfer, and such shareholder agreements are binding even if not explicitly incorporated into the Articles, provided they are not repugnant to them.
A Single Judicial Member of Justice Yogesh Khanna observed that Flovel had made the payment of the entire consideration amount, acquired an order of the Paris Commercial Court confirming the sale, and the Judicial Liquidator recognized all legal rights and financial interest vested in Flovel. The NCLAT held that since the Appellant Company had withheld the issuance of duplicate share certificates, it could not allege that Flovel cannot maintain the petition, affirming that a person entitled to hold shares based on beneficial/financial interest can maintain a petition under Section 241-242.
The National Company Law Tribunal (NCLT), New Delhi Bench, has clarified that a document titled ‘Deed of Hypothecation’ that contains a covenant whereby the hypothecator undertakes to cause the borrower to pay or repay the borrower’s dues, constitutes a contract of guarantee, rendering the executing party a Corporate Guarantor under Section 5(5A) of the Insolvency and Bankruptcy Code, 2016, irrespective of the nomenclature of the document.
The Tribunal explained that under Section 60(2) and 60(3) of the Insolvency and Bankruptcy Code, 2016, an application relating to the insolvency resolution of a Corporate Guarantor must be filed before the same National Company Law Tribunal Bench where the Corporate Insolvency Resolution Process of the Principal Debtor is pending, overriding the general territorial jurisdiction rules based on the registered office of the Corporate Guarantor.
The Division Bench comprising Ashok Kumar Bhardwaj (Judicial Member) and Reena Sinha Puri (Technical Member) observed that the execution of the Deed of Hypothecation by the Corporate Debtors made them liable as Corporate Guarantors. Clause 1 of the Deed explicitly contained a covenant that the Hypothecators ‘shall cause the Borrower(s) to pay/repay the Borrower’s Dues’. Relying on the Supreme Court judgment in China Development Bank vs. Doha Bank Q.P.S.C. [(2025) 7 Supreme Court Cases 729], the Tribunal noted that the nomenclature of a document is not decisive; a contract becomes a guarantee when it is an undertaking to perform the promise or discharge the liability of a third person in case of default. Therefore, the Corporate Debtors stood as sureties for the repayment of the debt procured by the Principal Debtor.
NCLT: Property Tax Dues During CIRP Not Insolvency Resolution Process Costs Without CoC Approval
The Mumbai Bench of the National Company Law Tribunal (NCLT) has ruled that maintenance dues and property tax dues arising during the liquidation period, even in respect of assets that stood attached by the Enforcement Directorate (provided they have not been confiscated and continue to vest in the Corporate Debtor), directly serve the purpose of preservation and protection of the liquidation estate and bear the character of ‘liquidation costs’ within the meaning of Regulation 2(1)(ea) of the IBBI (Liquidation Process) Regulations, 2016.
Conversely, the Tribunal clarified that the dues arising during the CIRP period cannot be classified as “insolvency resolution process costs” merely because they accrued during that period; and that they must be directly related to the CIRP and expressly approved by the Committee of Creditors as mandated by Regulation 31(e) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
The Division Bench comprising Sushil Mahadeorao Kochey (Judicial Member) and Sanjiv Dutt (Technical Member) observed that under Section 5(13) of the IBC read with Regulation 31(e) of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, a cost qualifies as a CIRP cost only if it is directly related to the CIRP and has been approved by the Committee of Creditors (CoC). In the present case, the CoC had not approved the maintenance dues to be treated as CIRP costs, and the mere fact that the dues arose during the CIRP period is not determinative for them to be classified as CIRP costs.
NCLAT: TDS Refund Powers Vest Exclusively with Income Tax Authorities, Not NCLT Under IBC
The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has ruled that the Adjudicating Authority (NCLT) under the Insolvency and Bankruptcy Code, 2016 (IBC) does not possess the jurisdiction or power to direct the refund of TDS deducted on interest accruing on fixed deposits; and that the exercise of powers regarding the refund of TDS is the exclusive prerogative of the Income Tax Authorities under the prevailing income tax laws.
The overriding effect of Section 238 of the IBC over the Income Tax Act cannot be invoked prematurely; it can only be subjected to judicial scrutiny after the Income Tax Authorities have made a definitive decision regarding the exemptions claimed, particularly because the IBC, 2016 is silent on the specific aspect of TDS refunds.
A Single Judicial Member Justice Sharad Kumar Sharma observed that the direction issued by the Adjudicating Authority (NCLT) was merely an enabling direction for the Liquidator to submit a simpliciter account showing the income and expenditure of the Corporate Debtor during the liquidation period, which was required before the Income Tax Authorities could consider the refund request. The Tribunal noted that the Appellant’s challenge was a ‘challenge in premonition’, attempting to forestall the process and nip the problem at its bud based on an apprehension that the Income Tax Authorities would demand regular returns.
The National Company Law Appellate Tribunal (NCLT), Principal Bench, New Delhi, has held that the Debenture Trustee having proved the debt and default, initiation of Corporate Insolvency Resolution Process (CIRP) against the corporate debtor cannot be faulted; however, CIRP against the corporate debtor is to be confined to only the specific project (Project Aspirations) for which the finance was extended and securities were provided, and the CIRP cannot be extended to other projects of the corporate debtor.
The Division Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that there was a default on the part of the company to pay the amount of Rs. 29,72,29,959/- on the date when the Section 7 application was filed. The amount claimed in Part IV of the Section 7 application of Rs. 274 crore and odd was not the correct amount, as it incorrectly included the principal payment of debentures of Rs. 146 crore which was due only on June 30, 2024.
NCLAT: Section 9 IBC Plea by Non-Existent Entity at Time of Filing Not Maintainable
The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) has upheld the dismissal of the Company Petition, as the company was not into existence in the eyes of law at the time of the institution of Section 9 Application of Insolvency & Bankruptcy Code, 2016 (IBC). Owing to the said fact, since the proceedings was drawn by a non-existing entity, it was not maintainable and the same has been rightly dismissed by the NCLT.
The Division Bench comprising Justice Sharad Kumar Sharma (Judicial Member) and Jatindranath Swain (Technical Member) observed that since the Company Petition itself was preferred on Sep 19, 2024, the entity which was alleged to be holding a juristic authority and juristic existence to file the Company Petition, in fact was rather a non-existing entity. M/s. Samunnati Agro Solutions Private Limited, was not legally in existence at that point of time and there was no reservation of right reserved, to sue or be sued.