2026 Supreme Court mid-year review: Insolvency and Bankruptcy

The first six months of 2026 saw notable decisions on insolvency by the Supreme Court in cases concerning admission of the Corporate Insolvency Resolution Process (CIRP), corporate guarantees, resolution applicants, limitation, licensed spectrum and the relationship between the Insolvency and Bankruptcy Code, 2016 (IBC) and other statutes. 

This period coincided with an amendment to the Act which introduced a creditor-initiated insolvency resolution process and new frameworks for group and cross-border insolvency. As the statutory framework evolved, the Court was called upon to answer recurring questions at the heart of the insolvency regime: when can CIRP be initiated, who may participate in the resolution process, what constitutes a financial debt and where do the Code’s boundaries lie? 

Admission threshold

On 15 January, in Elegna Co-operative Housing and Commercial Society v Edelweiss Asset Reconstruction Company, Justices J.B. Pardiwala and R. Mahadevan directed admission of Edelweiss’s application for insolvency proceedings over default on a ₹70 crore loan advanced for the Takshashila Elegna project in Ahmedabad. The National Company Law Tribunal’s refusal to admit the application had been reversed by the National Company Law Appellate Tribunal (NCLAT). 

Upholding the NCLAT decision, the Supreme Court held that the inquiry under Section 7(5)(a) of the IBC is confined to the existence of a financial debt and default. Once these are established, admission must follow. Considerations such as project viability, stage of completion, anticipated receivables or perceived prejudice to homebuyers are extraneous at the admission stage. 

The Court further held that a housing society does not possess locus standi to intervene in Section 7 proceedings before admission, noting that such proceedings are in personam between the financial creditor and the corporate debtor. At the same time, it reiterated that the IBC is a framework for resolution rather than recovery and issued directions aimed at protecting homebuyers during CIRP, including greater disclosure requirements and reasoned decision-making by the Committee of Creditors (CoC) in real estate insolvencies.

On 13 February, in State Bank of India v Union of India, Justices P.S. Narasimha and Manoj Misra held that sovereign control over natural resources such as spectrum cannot become subservient to insolvency proceedings under the IBC. It observed that Telecom licensees possess only a conditional, revocable privilege to use spectrum, held by the Union as public trustee under Article 39(b) and Section 4 of the Telegraph Act, 1885. The Code covers only those tangible or intangible assets owned by the corporate debtor and observed that spectrum is a natural resource held by the Union as a public trustee. Telecom service providers possess only a conditional and revocable right to use it. Sovereign control over natural resources, the Court held, cannot be subject to insolvency proceedings.

On 18 February, in Power Trust v Bhuvan Madan, a Bench of Chief Justice Surya Kant and Justices Joymalya Bagchi and V.M. Pancholi held that failed restructuring proposals do not novate the original loan agreement. It rejected the corporate debtor’s argument that the first default occurred during the pandemic period protected by Section 10A of IBC. It held that, at the stage of admitting a Section 7 application, the Adjudicating Authority is only required to determine the existence of a financial debt and default, not questions relating to financial viability or disputes between parties.

Insolvency not a substitute for recovery

On 23 April, in Anjani Technoplast v Shubh Gautam, a Bench of Justices Narasimha and Alok Aradhe held that insolvency proceedings cannot be used as a substitute for civil execution. It set aside the NCLAT’s order directing admission of the Section 7 application on the ground that the decretal amount constituted a financial debt and reiterated that the IBC is a legislation for reorganisation and revival of corporate debtors, not debt recovery. 

The respondent had advanced ₹4.5 crore to the appellant. Following defaults and dishonoured cheques, the Delhi High Court passed a money decree directing payment of 4.38 crore with interest at 24 percent per annum. After the decree attained finality, the respondent initiated Section 7 proceedings instead of pursuing execution. Restoring NCLT’s order for dismissal of the application, the Supreme Court directed the respondent to pay costs of ₹5 lakhs.

Parallel proceedings and corporate guarantees

On 24 February, in Omkara Assets Reconstruction v Amit Chaturvedi, Justices P.V. Sanjay Kumar and K.V. Chandran held that pending proceedings relating to a Scheme of Arrangement under the Companies Act, 2013 cannot bar the initiation of insolvency proceedings under the IBC.  It held that  Section 7 is for an independent proceeding and reiterated that the IBC prevails in the event of a conflict with the Companies Act.

On 26 February, in ICICI Bank v Era Infrastructure, Justices Dipankar Datta and A.G. Masih held that insolvency proceedings may be maintained simultaneously against a principal borrower and a corporate guarantor. The dispute arose from loans advanced to Era Infra Engineering and guaranteed by Era Infrastructure (India). The Court held that initiation of CIRP against one entity does not bar proceedings against another entity which has independently undertaken liability for the same debt.

On 28 April, in State Bank of India v Doha Bank Q.P.S.C., Justices Narasimha and Aradhe held that a liability arising from a corporate guarantee falls squarely within the definition of “financial debt” under Section 5(8) of the IBC and that the beneficiary lenders were entitled to be recognized as financial creditors. The Bench was considering a challenge to claims filed by an SBI-led consortium in the insolvency of Reliance Infratel. 

Setting aside the decisions of the NCLT and NCLAT, the Court found that execution of the guarantees stood admitted by the corporate debtor, that mere non-disclosure in financial statements could not defeat a valid claim, and that documents relevant to determining creditor status could be produced before the NCLAT. Describing the findings of the tribunals as perverse, the Court restored the consortium lenders to the CoC and directed its reconstitution.

Who can submit a resolution plan?

On 9 April, in Nirmal Ujjwal Credit Co-operative Society v Ravi Sethia, a bench of Justices Pardiwala and K.V. Viswanathan held that there is no blanket ban on co-operative societies to act as resolution applicants under the IBC. The dispute arose after the Resolution Professional and the CoC found Nirmal Ujjwal Credit Co-operative Society ineligible to acquire Morarji Textiles during its CIRP. 

Although the appeal was ultimately withdrawn, the Court proceeded to explain the scope of Section 64(d) of the Multi-State Co-operative Societies Act, 2002, which permits a society to invest in a subsidiary institution or in an institution in the “same line of business”. Referring to the 2023 amendment to Section 64(d), the Court observed that the expression was introduced to prevent dubious or unrelated investments and to safeguard members’ funds. It held that “same line of business” must be determined with reference to the objects and functions set out in the society’s bye-laws and requires a substantial or predominant sameness in business activities. 

Applying this standard, the Court agreed with the NCLAT that financial services and member welfare could not be treated as being in the same line of business as manufacture of man-made fibre and viscose-based textiles. It noted that merely amending the investment clause in the bye-laws to mirror Section 64(d) would not alter the society’s line of business in the absence of a corresponding amendment to its object clause.

On 14 May, in Cosmic CRF v Myotic Trading, a Bench of Justices Pardiwala and Ujjal Bhuyan clarified the scope of Section 29A(c) of the IBC which disqualifies persons with Non-Performing Assets (NPAs) from submitting resolution plans. Setting aside the NCLAT’s order, it held that eligibility must be determined on the date of submission of the plan. 

The NCLAT had held Cosmic CRF ineligible to submit a resolution plan for Amzen Transportation Industries on the ground that its Managing Director was connected with Cosmic Ferro Alloys (CFAL) who had undergone CIRP after its account was classified as a NPA. The Supreme Court noted that CFAL’s CIRP concluded in October 2018, nearly 6 years before Cosmic CRF’s  resolution plan was submitted and approved. Once a company stands resolved and operates on a “clean slate”, the Court held, extinguished claims cannot be revived to determine a resolution applicant’s eligibility.

Keeping a claim alive

On 29 April, in Shankar Khandelwal v Omkara Asset Reconstruction, a Bench of Justices Narasimha and Aradhe held that admission of a claim during a resolution process  is merely an administrative function and does not amount to an acknowledgment of liability under Section 18 of the Limitation Act, 1963. 

The dispute arose from loans advanced by Dewan Housing Finance Corporation two years before its accounts were classified as NPAs. After accounting for the exclusion of limitation during the CIRP of DHFL, the COVID-19 extension period and the pendency of an earlier CIRP against the corporate debtors, the Court found that the Section 7 application was filed nearly two months after the limitation period expired.. The NCLAT had held that admission of the creditor’s claim during the earlier CIRP constituted an acknowledgment and kept the claim within limitation. Reiterating that limitation runs from the date of default and that an acknowledgment can extend limitation only if made within the subsisting limitation period, the Court held the application to be time-barred and set aside the orders of the NCLAT and NCLT.