Insolvency & Bankruptcy Code Updates (October 2025)

JUDGMENTS

1. Possession over Refund: Supreme Court's Interpretation of Homebuyers' Claims under IBC

Case Title: Amit Nehra & Anr. Vs. Pawan Kumar Garg (click here)
Citation: CIVIL APPEAL NO. 4296 OF 2025
Court: Supreme Court
Decided on: 09.09.2025

FACTS

Appellants in this case approached the Supreme Court u/s 62 of the IBC Act, 2016 challenging the decision of NCLAT, New Delhi. Appellants deposited significant amount for the possession of their flat which was being constructed in Mohali, Punjab. The corporate debtor had the duty to hand over the possession of the flats on 27.11.2013 but failed to do so, resulting in Appellants initiating proceedings in SCDRC seeking refund along with interest and compensation.

In 2018, SCDRC disposed the complaint on the ground that NCLT has accepted application u/s 7 of IBC, 2016 and directed the appellant to pursue their claim before NCLT under CIRP proceedings. Following the initiation of CIRP, Appellant on 11.01.2019 submitted Form-CA along with supporting documents in the physical form, whose validity was contested by the Respondents on the ground that the physical copy of the claim was not received at the notified address of the Resolution Professional. On 21.01.2020, the Resolution Professional called for the resubmission of claims via email citing incomplete records of corporate debtor. The claims of Appellants were then duly admitted by Resolution Professional (RP). In spite of the inclusion of claims of appellants, they are not delivered the possession of their flats. Possession of flats to the appellants was denied both by NCLT and NCLAT.

ISSUES

1. Whether the Appellants being allottees of an apartment in the project at Mohali and having paid a sum of Rs.57,56,684/- out of the total consideration of Rs. 60,06,368/-, are to be treated as belated claimants entitled only to refund of 50% of their principal deposit as per Clause 18.4 (xi)
2. Whether, their claim having been duly verified and incorporated in the list of creditors, they are entitled to possession in terms of the Resolution Plan under Clause 18.4 (ii).

JUDGEMENT

The Apex court recognised the Appellants as bona fide buyer having to paid a significant amount out of the total amount to be paid as consideration. The claims filed by the Appellants were considered legitimate as the email was sent to the Resolution Professional and acquired legal recognition within CIRP process. The Apex Court also observed that NCLAT erred is considering the publication of the list of financial creditors are mere formality but upheld the publication of such list to be the statutory duty of the Resolution Professional. The Court affirmed the reliance on Puneet Kumar v. K.V. Developers Pvt. Ltd. in which the NCLAT then had observed that the claims of the homebuyers whose claims are reflected in the record should be appropriately dealt with, contrary would lead to an unfair resolution. Therefore, such record shall be put up before the Committee of Creditors. The court now in this case, observed that the claims of Appellants fell within the category enunciated by Clause 18.4 (ii) of the resolution plan as all the necessary conditions like claims being filed and admitted by Resolution Professional, issuing of allotment letter would amount to honouring the claims in full. The Apex Court, also recognised the rights of the Allotees (Appellant), as they had paid the consideration years in advance for the possession of the flat(s), and reducing their right to mere refund of consideration would be against the legislative framework, and would be unfair to them.

The Apex Court set aside the orders passed by NCLT and NCLAT, directing the Respondents to handover the possession in 2 months from the date of judgement.

2. When an Advance Becomes a Financial Debt: NCLAT's Interpretation under Section 7 of IBC

Case Title: Bijendra Prasand Mishra Vs. H.S Mercantile Pvt. Ltd. & Anr. (click here)
Citation: Company Appeal (AT) (Insolvency) No. 2364 of 2024
Court: NCLAT, Principal Bench at New Delhi
Decided on: 15.09.2025

FACTS

Appeal was preferred in front of the NCLAT, New Delhi challenging the order allowing application u/s 7 of IBC, 2016 passed by NCLT, Kolkata moved by Respondent no.2 against the Respondent no.2 (corporate debtor). A private entity, Subh Chintak Commotrade Pvt. Ltd., (which was later amalgamated with Respondent no.2), had advance ₹ 50 Lakhs to appellant. The purpose for this advance according to appellant was for supplying of textile martials. For the respondent no.2, this very advance was given to appellant as a loan and not as an advance payment for supply of textile goods.

Appellant claims to have discharged his duties and issued 23 invoices amounting to payment of ₹ 72, 39,520 on 01.04.2016. After the rejection of application u/s 7 of IBC, 2016 filed by Subh Chintak, respondent no.2 filed the section 7 application which was allowed and remanded back by the Appellate Tribunal after the NCLT rejected the application, NCLT complied with the order of Appellate Tribunal and allowed the section 7 application. Respondent has also contended that appellant had deduced and deposited TDS on the interest amounting to ₹ 4,50,000 on principle amount ₹ 50,00,000 from 2010-11 to 2015-16, and also recognised it as sundry/unsecured loan.

Notices were issued to the appellant, however, there was no reply given by the appellant. Appellant has also mentioned the exact amount, tallying with the records of creditor, ₹ 74,82,590 under the head of loan term borrowings. Court observed that there was no written agreement between the parties which affirmed the said transaction to be a debt. NCLT earlier had rejected section 7 application on the ground that there was no formal agreement between the parties acknowledging the debt.

The court observed that dispersal of the ₹ 50 Lakh amount has been recorded by entry in the bank account statements of both appellant and respondent, and therefore there was no need of any written agreement. The Tribunal emphasised on the fact that appellant in the records from 2009 had mentioned the impugned advance as unsecured loan and not as an advance for the purchase of goods, therefore the advance attaining the status of inter corporate loan. Other major observation of the tribunal were that, the respondent no.2 did not deal with textiles, but stocks and shares. It also declared the invoices presented by appellant as fake. It was submitted that the closing inventory of 2015-16 was valued at ₹ 30,94,726 but the claim of appellant of supplying ₹ 72,39,250 worth of goods, therefore it is held by the court that such goods as claimed by appellant were never supplied. The amount ₹72,39,250 was exactly tallying with the debt acknowledged under CIRP.

ISSUES

1. Whether the ₹50,00,000/- given in November 2009 was a financial debt (loan) or merely an advance for supply of goods, and whether the creditor's Section 7 IBC application was filed within limitation?

JUDGEMENT

Providing of interest @9% and TDS deductions by the appellant amounts to the transaction being of a debt. Court also raised a question that if the money given as advance for the supply of goods was ₹ 50 Lakh, then why appellants would supply goods worth of ₹ 72,39,250, raising question on the submissions made by the appellant. Tribunal also declasred that the closing inventory of 2015-16 was valued at ₹ 30,94,726 but the claim of appellant of supplying ₹ 72,39,250 worth of goods, therefore it is held by the court that such goods as claimed by appellant were never supplied. The tribunal here relied on Innoventive Industries Limited v. ICICI Bank (2018) 1 SCC 407 observing that it is settled that for initiation of CIRP u/s 7, the adjudicating authority, is required to determine the existence of debt and occurrence of default. To substantiate tribunal relied on Regulation 8(2) of IBBI Regulations, 2016. Other precedents on with tribunal relied were Agarwal Polysacks Limited vs K.K. Agro Foods and Storage Limited, 2023 SCC Online NCLAT 624, Satish Balan v. Mrs. Neeta Navin Nagda, Company Appeal where the tribunal held that contract was not the exclusive document to prove the debt in the light of reg. 8(2), IBBI, 2016. The appeal was therefore dismissed by the tribunal finding no merit.

3. Interpreting Section 244(1)(b) of the Companies Act, 2013, Only Existing Members Can Invoke Oppression and Mismanagement Remedies

Case Title: Madras Race Club v R.D. Ramasamy and Anr. (click here)
Citation: Company Appeal (AT) (CH) No. 17 / 2024
Court: NCLAT, Chennai
Decided on: 17.09.2025

FACTS

Madras Race Club is a Section 8, non-profit company without share capital, having about 7,417 members when CP (CA) No.64 (CHE) / 2022 was filed. Earlier, in CP/31/2017, a member sought directions under Section 96 to convene the AGM for FY 2015- 16. Because irregularities were found in the membership database, the Club engaged M/s Brahmayya & Co. to conduct a special audit. The audit (January 2017) reported that, of 924 persons admitted during 2000–2015, only 53 were fully compliant with the Articles 277 had not complied at all; 594 were partially compliant; and only 285 had paid entrance fees. The NCLT (27.08.2017) appointed Justice K.P. Sivasubramaniam (Retd.) to inquire into membership genuineness and oversee the AGM process. His report (15.11.2017) emphasized that club membership is not a right but a matter of election subject to payment of entrance and subscription fees, and that mere long usage does not create rights where entry itself is void. He identified 635 non- compliant members, 285 of whom produced no proof of entrance-fee payment.

On 13.12.2017, NCLT directed convening the AGM and recognized the report. After notice to affected persons in a second round, NCLT (24.09.2019) accepted the retired judge's report and directed rectification of the Register by removing 635 names and holding AGMs for 2015- 16 to 2018-19 within two months. On appeal by some affected persons, NCLAT (29.05.2020) affirmed NCLT's findings, expressly noting non-payment of entrance fees, with a modification that AGM 2018-19 "additionally consider" permitting membership on payment of entrance fee with interest at the SBI FD rate for the delayed years, based on genuineness as identified by the audit and the retired judge's scrutiny.

The Club later placed this "regularization on payment with interest" before AGM 2019-20, which rejected the proposal by an overwhelming majority. Thereafter, two individuals from

the removed cohort (R1 and R2) filed CP (CA) No.64 (CHE) / 2022 under Sections 241, 242 and 59 alleging oppression and mismanagement, accompanied by an application under Section 244(1)(b) seeking waiver of threshold requirements for companies without share capital. By order dated 09.01.2024, NCLT granted waiver, invoking "exceptional circumstances."

ISSUES

1. Whether applicants who had been removed from the Club's membership and whose names no longer appeared on the Register could invoke the proviso to Section 244(1)(b) to seek a waiver of eligibility thresholds for filing a petition under Sections 241- 242.

JUDGEMENT

Allowing the appeal, the NCLAT (Chennai) set aside the NCLT's waiver order dated 09.01.2024 and closed pending IAs. The Tribunal held that Section 244 is an enabling, exception-carving provision that can be invoked only by a "member" as defined in Section

2(55). The first and indispensable step in considering a waiver is to ascertain whether the applicant is a member at the time of seeking waiver; if not, the application must be rejected outright. Reliance was placed on Cyrus Investments Pvt. Ltd. v. Tata Sons Ltd. (paras 145– 146), which mandates that the Tribunal, before granting waiver, must: (a) confirm the applicant's status as a member; (b) prima facie see that the proposed petition pertains to oppression and mismanagement; (c) consider prior adjudication on similar allegations; and (d) identify exceptional circumstances. On the first factor, the respondents failed: two separate, unrebutted determinations—the special audit and Justice Sivasubramaniam's report had already concluded that their admissions were non-compliant; NCLT's 24.09.2019 order directed removal of 635 names; and NCLAT's 29.05.2020 judgment did not disturb those findings. Rather, the 2020 judgment provided only a gratuitous, additional consideration by the AGM to regularize on payment with interest, which created no vested right. The AGM subsequently rejected the proposal, and there was no subsequent revival or restoration of the respondents' membership.

The NCLAT rejected the NCLT's reliance on vague "exceptional circumstances," noting that the impugned order's phrasing ("could be an exceptional circumstance") betrayed uncertainty and lacked concrete material or reasoning identifying what those circumstances were. The Tribunal emphasized that waiver cannot rest on hypothetical or equitable notions; Section 244

entails adjudication of a substantive statutory gateway and cannot be extended to non-members without inviting procedural chaos by allowing "all and sundry" to litigate internal affairs. Past enjoyment of facilities since 1998 and the Club's social objectives are legally irrelevant to the Section 244 inquiry, which turns on present membership status. Citing Nasik Diocesan Trust Association v. Uday Daniel Khare, the Tribunal reiterated that erstwhile members cannot maintain waiver applications absent proof of current membership.

Accordingly, because the respondents were not members when they sought waiver, and because no "exceptional circumstances" were identified or substantiated, the application under the proviso to Section 244(1)(b) was not maintainable. The impugned NCLT order was quashed.

4. Validity of Security Trustee's Authority Post-Assignment: NCLAT Upholds CIRP Against Corporate Guarantor

Case Title: Deepak Raheja & Anr. v. IDBI Trusteeship Services Ltd. & Anr. (click here)
Citation: Company Appeal (AT) (Insolvency) No. 180 of 2025
Court: NCLAT, Principal Bench at New Delhi
Decided on: 12.09.2025

FACTS

Piramal Capital and Housing Finance Ltd. (PCHFL) granted loans to Gstaad Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd. on 26 December 2017. A Security Trustee Agreement was executed on the same date among the borrowers, PCHFL, and IDBI Trusteeship Services Ltd. (IDBI Trusteeship) as Security Trustee. On that very day, Advantage Raheja Hotels Pvt. Ltd. (the Corporate Debtor or CD) executed a Deed of Guarantee in favour of IDBI Trusteeship, guaranteeing repayment of the loan.

In December 2022, PCHFL assigned all its rights in the loan to Omkara Assets Reconstruction Pvt. Ltd. ("Omkara") by a Deed of Assignment. When the borrowers defaulted, Omkara issued a legal notice on 15 February 2023 and filed Section 7 applications before the NCLT, Mumbai Bench against both principal borrowers. Those petitions were initially admitted on 9 January

2024, but on appeal (Company Appeal (AT) (Ins.) Nos. 165 & 212 of 2024) the NCLAT set aside the admission orders on 8 January 2025 and remanded the matter for fresh consideration.

Meanwhile, IDBI Trusteeship, acting as Security Trustee, filed a separate Section 7 application against the Corporate Guarantor, Advantage Raheja Hotels Pvt. Ltd. The NCLT, Mumbai Bench, Court-II admitted that application on 17 December 2024, initiating CIRP and appointing IRP. The order also recorded that both principal borrowers were already under CIRP.

Aggrieved, Deepak Raheja and another, suspended directors of the Corporate Debtor, filed this appeal before the NCLAT, challenging the admission order

ISSUES

1. Whether IDBI Trusteeship Services Ltd. was duly authorised to file the Section 7 application against the Corporate Debtor in its capacity as Security Trustee after the loan had been assigned to Omkara Assets Reconstruction Pvt. Ltd.
2. Whether the CIRP admission order against the Corporate Guarantor was sustainable when the admission of CIRP against the principal borrowers had initially been set aside but later reaffirmed.

JUDGEMENT

During the appeal hearing, the principal contention raised by the appellants was that IDBI Trusteeship lacked locus standi to initiate proceedings under Section 7 of the IBC, as it did not have valid authorisation from the assignee, Omkara. The appellants argued that the Security Trustee Agreement was rendered ineffective upon assignment of the loan, and hence, the Financial Creditor's application was unauthorised. They relied on Malavika Hegde v. IDBI Trusteeship Services Ltd. (2025 SCC OnLine NCLAT 422) and M. Sai Eswara Swamy v. Siti Vision Digital Media Pvt. Ltd. (2021 SCC OnLine NCLAT 3444) to contend that a petition filed without proper authorisation is not maintainable.

On the other hand, the respondent, IDBI Trusteeship, argued that the Security Trustee Agreement expressly empowered it to act upon written instructions from the lender. The respondent referred to Clause 5.2 of the said agreement and submitted that Omkara, as assignee of the loan, had in fact issued written instructions on 15 March 2023 authorising IDBI

Trusteeship to issue recall and personal guarantee invocation notices. This instruction was further confirmed by an email dated 23 March 2023 from PCHFL, which clarified that Omkara intended to initiate insolvency proceedings through IDBI Trusteeship. Thus, the respondent maintained that the Section 7 application was filed with valid authorisation and in compliance with the agreement's provisions.

The Appellate Tribunal, after examining the record, observed that the Adjudicating Authority had already considered and rejected the objection regarding authorisation in paragraph 33 of the impugned order. The NCLT found that Clause 5.2 of the Security Trustee Agreement authorised the Financial Creditor to act upon written instructions from the lender. It was also established that Omkara had indeed provided such written instructions by email dated 15 March 2023, directing IDBI Trusteeship to issue recall and guarantee invocation notices. The Tribunal verified the email on record and held that it constituted sufficient evidence of authorisation. The Tribunal further observed that assignment of the loan from PCHFL to Omkara did not terminate the Security Trustee Agreement; instead, Omkara merely stepped into the shoes of the original lender, while IDBI Trusteeship continued in its role as Security Trustee. No evidence was provided by the appellants to prove that the trustee arrangement had been terminated.

The Appellate Tribunal distinguished the precedents relied upon by the appellants, holding that those cases pertained to circumstances where no authorisation was produced or proved, unlike the present case where both pleading and proof of authorisation were evident from the record. The Tribunal also noted that the CIRP proceedings against the principal borrowers Gstaad Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd. had, by the time of this judgment, been affirmed by NCLAT through dismissal of appeals on 19 August 2025. Thus, initiation of CIRP against the Corporate Guarantor was consistent with law, as the liability of guarantor and borrower is co-extensive under Section 128 of the Contract Act and both proceedings may proceed simultaneously.

In light of these findings, the Appellate Tribunal concluded that IDBI Trusteeship Services Ltd. had valid authority under the Security Trustee Agreement, reinforced by Omkara's written instructions, to file the Section 7 application. The Tribunal held that there was no infirmity in the NCLT's order admitting the petition and commencing CIRP against the Corporate Debtor.

Consequently, the appeal was dismissed, with the Tribunal observing that there was no merit in the arguments raised by the appellants.

The NCLAT thus upheld the order of the Adjudicating Authority and confirmed the continuation of the CIRP against the Corporate Guarantor, Advantage Raheja Hotels Pvt. Ltd., concluding that the proceedings were duly authorised, legally sound, and supported by contractual and evidentiary foundations. The Tribunal made no order as to costs.

The appeal stands dismissed. The order dated 17 December 2024 of the NCLT admitting the Section 7 application is upheld. There is no error in the initiation of CIRP against the Corporate Guarantor.

5. Interplay Between BIFR Schemes and IBC Resolution Plans: NCLAT Affirms Supremacy of IBC Framework

Case Title: Trinity Auto Components Ltd. v. Axis Bank Ltd. (click here)
Citation: Company Appeal (AT) (Insolvency) No. 1757 of 2024
Court: NCLAT, Principal Bench at New Delhi
Decided on: 11.09.2025

FACTS

Trinity Auto Components Ltd. (TACL), engaged in manufacturing forged engine and chassis parts for heavy commercial vehicles, was declared a sick industrial company and taken over for rehabilitation by Tarini Steels Ltd. under a scheme sanctioned by the erstwhile BIFR on 7 November 2014. The scheme, modified later by the Delhi High Court, bound all stakeholders under Sections 19(3) and 18(8) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). Axis Bank was the sole secured creditor. Under the scheme, the bank was to restructure dues by reducing the interest rate to 12% per annum from 31 March 2011 and convert the outstanding dues into a term loan repayable in 48 instalments, with a six-month moratorium.

Despite the binding scheme, Axis Bank continued charging 14.75%- 16% interest. When this was objected to, the bank credited ₹1.18 crore as excess interest to TACL's account in March 2017. After SICA's repeal on 1 December 2016, Axis Bank again raised interest rates, creating an alleged excess debit of ₹82 lakh. TACL claimed that the BIFR scheme remained binding even after repeal, since it was saved under Section 5(1) (d) of the SICA Repeal Act, 2003.

Unable to service its unsecured operational creditors, TACL filed a voluntary insolvency application under Section 10 of the Insolvency and Bankruptcy Code, 2016. The NCLT admitted the case on 25 May 2017 and approved a resolution plan on 22 January 2018. Under this plan, Axis Bank was to provide additional working-capital finance of ₹400 lakhs, in addition to the existing ₹368 lakhs, at 12% p.a. and restructure ₹568 lakhs as a working-capital term loan, repayable over five years.

TACL alleged that Axis Bank, despite the plan, demanded refund of the ₹1.18 crore earlier credited, and continued charging higher interest, claiming that the BIFR scheme had failed. The company sought directions before the NCLT to enforce both the BIFR concessions and the resolution-plan benefits, including reversal of excess interest of ₹82 lakhs and withdrawal of Axis Bank's 2019 recovery letter. The NCLT partly allowed the plea- ordering refund of overcharged interest only for 25 May 2017 to 28 August 2018. Aggrieved, TACL appealed before the NCLAT.

ISSUES

1. Whether the concessions and reliefs granted under the BIFR-sanctioned scheme continued to apply after approval of the resolution plan under the IBC.
2. Whether TACL could simultaneously claim benefits under both the BIFR scheme and the IBC resolution plan.
3. Whether any interest or claim pertaining to the pre-CIRP period could survive after approval of the resolution plan.

JUDGEMENT

The Tribunal noted that the resolution plan contained no express clause continuing the BIFR terms. In fact, the interest obligations under the plan began from 25 May 2017 (the date of admission into CIRP), not from 2011 as in the BIFR scheme demonstrating that a new regime had been consciously adopted. The only clauses that referenced continuation of BIFR provisions were limited to "contingent liabilities" like statutory or unsecured-creditor dues

(income tax, sales tax, EPFO, etc.), not to secured-creditor arrangements such as Axis Bank's. Hence, extending BIFR concessions would amount to selectively applying favourable terms without reciprocal obligations, which was impermissible.

The NCLAT held that once a resolution plan is approved under Section 31(1) IBC, it becomes binding on all stakeholders creditors, employees, guarantors, and the corporate debtor—and all prior claims not forming part of it stand extinguished. Citing Ghanashyam Mishra & Sons v. Edelweiss ARC (2021 9 SCC 657), Essar Steel India Ltd. v. Satish Kumar Gupta (2020 8 SCC 531), Ebix Singapore Pte. Ltd. v. CoC of Educomp Solutions (2022 2 SCC 401), and Jet Airways India Ltd. v. SBI (NCLAT 2021), the Bench reiterated the clean-slate doctrine that all antecedent or undisclosed liabilities stand frozen on plan approval. Axis Bank, having 96% voting share in the CoC, could have included its claim for the ₹1.18 crore during the insolvency process; not doing so meant the claim was extinguished. Likewise, any excess-interest claim by the company for the pre-CIRP period could not survive.

Further, the repeal of SICA and the transition to IBC under Section 252 reinforced that BIFR proceedings abate and migrate to the insolvency framework. Section 238 IBC grants the Code an overriding effect over inconsistent laws, thereby nullifying residual claims under SICA schemes. The Court referenced Swiss Ribbons Pvt. Ltd. v. Union of India (2019 4 SCC 17), affirming that the IBC replaced SICA's inefficacious regime with a comprehensive, time- bound, creditor-driven mechanism.

The Tribunal also cited Vaibhav Goyal v. Deputy Commissioner of Income Tax (2025 SCC OnLine SC 592) to emphasize that even uncrystallized or statutory dues are extinguished if not included in the resolution plan. Therefore, both the appellant's and the respondent's demands being pre-CIRP liabilities were barred.

The Hon'ble NCLAT concluded that:

1. The BIFR scheme stood superseded by the approved resolution plan.
2. Only the terms of the resolution plan were binding on both parties.
3. Neither Axis Bank nor TACL could revive or reclaim any pre-CIRP claims or benefits arising under the BIFR scheme.
4. The adjudicating authority's limited direction for refund of overcharged interest between 25 May 2017 and 28 August 2018 was proper.

Accordingly, the appeal was dismissed, affirming that after the resolution plan's approval, all earlier concessions, liabilities, and disputes under BIFR stood extinguished in keeping with the IBC's clean-slate principle.

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