Practice Area

IBC & Insolvency

The Insolvency and Bankruptcy Code, 2016 has fundamentally restructured how financial distress is managed in India. The firm advises across the full spectrum of IBC proceedings.

Financial Creditor Applications — Section 7

Section 7 of the IBC permits a financial creditor to initiate the Corporate Insolvency Resolution Process (CIRP) upon default of a financial debt. The application is filed before the National Company Law Tribunal (NCLT) and must satisfy the threshold of INR 1 crore. The firm advises financial creditors — banks, NBFCs, debenture holders, and other structured finance counterparties — on the preparation and filing of Section 7 applications, including the documentation of the financial debt, proof of default, and responses to preliminary objections raised by the corporate debtor.

The firm also advises on the strategic timing of Section 7 filings, the interaction between Section 7 proceedings and ongoing security enforcement actions, and the implications of filing in the context of existing arbitration or civil proceedings.

Operational Creditor Applications — Section 9

Section 9 permits an operational creditor to initiate CIRP upon non-payment of an operational debt. The procedure requires service of a demand notice under Section 8, followed by the Section 9 application if the debt remains undisputed and unpaid. The firm advises operational creditors — including vendors, service providers, and employees — on the preparation of demand notices, responses to disputed debt claims, and the filing and prosecution of Section 9 applications.

Resolution Plan Advisory

The resolution plan is the commercial and legal instrument through which a resolution applicant acquires a distressed company and restructures its obligations. The firm advises resolution applicants on plan structuring, financial modelling inputs from a legal perspective, treatment of different classes of creditors, Section 29A eligibility analysis, and the approval process before the Committee of Creditors and the NCLT.

The firm also advises financial creditors on evaluating resolution plans submitted by competing applicants, including compliance with the Insolvency and Bankruptcy Board of India (IBBI) regulations and the applicable case law on minimum liquidation value and fair treatment of creditors.

NCLAT and Supreme Court Appeals

IBC matters that are decided by the NCLT are subject to appeal before the National Company Law Appellate Tribunal (NCLAT). From the NCLAT, further appeal lies to the Supreme Court under Section 62 of the IBC. As an AOR at the Supreme Court, the firm provides full appellate representation in IBC matters — from NCLAT filings through to Supreme Court hearings.

Landmark Authorities and Doctrinal Framework

The IBC’s operational architecture is defined as much by Supreme Court jurisprudence as by the statute itself. A small set of judgments has shaped how admission, plan approval, and distribution are actually practised.

Innoventive Industries Ltd. v. ICICI Bank, (2018) 1 SCC 407, is the foundational pronouncement on Section 7 enquiry. The Adjudicating Authority’s role at admission stage is confined to verification of debt and occurrence of default; contested defences are not adjudicated at that stage. The decision also settled that IBC prevails over repugnant state legislation under Article 254. This framework governed Section 7 practice until Vidarbha (below) introduced a discretionary element.

Swiss Ribbons Pvt. Ltd. v. Union of India, (2019) 4 SCC 17, addressed the constitutional validity challenge to the Code and upheld it in its entirety. The Supreme Court sustained the architectural choices, including the financial and operational creditor distinction, the Section 29A exclusions, and the Committee of Creditors’ decision-making primacy. The formulation of the CoC’s commercial wisdom as the guiding principle of judicial review under the Code traces to this decision.

Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta, (2020) 8 SCC 531, is the seminal ruling on plan approval and distribution. Three propositions carry forward: an approved plan under Section 31 binds all stakeholders, including guarantors, statutory authorities, and dissenting creditors, on a clean-slate basis; the word “mandatorily” in Section 12 was read down, holding the 330-day timeline to be directory rather than absolute; and the distribution framework between operational and dissenting financial creditors was clarified, leading directly to the 2019 statutory amendment on the minimum statutory floor under Section 30(2)(b).

K. Sashidhar v. Indian Overseas Bank, (2019) 12 SCC 150, confirmed the limited scope of judicial review over CoC commercial decisions. Reasons for rejection of a resolution plan by the CoC are not required to be recorded and are not second-guessed by the Adjudicating Authority.

Vidarbha Industries Power Ltd. v. Axis Bank Ltd., (2022) 8 SCC 352, marks a doctrinal shift. The Supreme Court held that Section 7(5)(a) is directory, not mandatory, the word “may” meaning the NCLT can decline admission even where debt and default are established, after considering surrounding circumstances. The review petition was dismissed, but subsequent benches have narrowed the holding on facts. Vidarbha remains the most-cited authority in contested Section 7 admission arguments today.

State Tax Officer v. Rainbow Papers Ltd., 2022 SCC OnLine SC 1162, reshaped the treatment of statutory dues within the Section 53 waterfall by holding that government dues secured by a statutory first charge (there, under the Gujarat VAT Act) qualify as secured creditor claims. In Paschim Anchal Vidyut Vitran Nigam Ltd. v. Raman Ispat Pvt. Ltd., 2023 SCC OnLine SC 842, the Supreme Court expressly confined Rainbow Papers to its own factual context, holding that the waterfall in Section 53 otherwise treats government dues at a lower priority. The doctrine remains contested and plan drafting now treats statutory-dues exposure as a live sizing exercise.

Lalit Kumar Jain v. Union of India, (2021) 9 SCC 321, upheld the Part III framework for personal guarantors of corporate debtors. The Court further confirmed that the liability of a guarantor is not discharged merely on approval of the corporate debtor’s resolution plan, the contract of guarantee being independent. Personal guarantor insolvency is now a live and active branch of IBC practice, with its own procedural architecture distinct from corporate CIRP.

The doctrinal position is therefore not static. Plan drafting practice must absorb each shift rather than rely on pre-shift templates, the risk-map that resolution applicants, CoC members, and operational creditors operate within has been recalibrated more than once since 2019.

Current Doctrinal Shifts and Live Questions

Several questions remain open and shape how advice is given today.

Vidarbha’s reach. Subsequent benches have distinguished and narrowed Vidarbha in specific fact patterns, and the SCC Axis Bank Ltd. v. Vidarbha Industries review order (2022) did not restore a mandatory admission rule but tightened the exceptional nature of the NCLT’s discretion. Financial creditors pursuing Section 7 admission now routinely face arguments drawn from Vidarbha on the Adjudicating Authority’s discretion to consider surrounding circumstances. Whether Vidarbha survives as a general-application principle or is read down as fact-specific continues to be worked out at the tribunal and appellate level.

Rainbow Papers confinement. The Paschim Anchal / Raman Ispat decision (2023) expressly confined Rainbow Papers to its own factual circumstances. In subsequent matters, the Supreme Court has held that government dues not secured by a statutory first charge continue to occupy a lower priority in the Section 53 waterfall. The position is therefore bifurcated: statutory first-charge dues retain secured-creditor treatment per Rainbow Papers; other government dues remain at the lower tier under the waterfall.

Cross-border insolvency. The draft Part Z chapter based on the UNCITRAL Model Law on Cross-Border Insolvency has not been notified. Cross-border coordination continues through Sections 234 and 235 bilateral mechanisms and through ad-hoc judicial cooperation. Matters involving foreign corporate debtors, foreign creditors seeking participation in Indian CIRP, or Indian entities in parallel proceedings abroad require bespoke structuring.

Group insolvency. The framework remains largely judicially managed. Coordinated CIRPs across group entities rest on the NCLAT’s developing jurisprudence rather than a statutory chapter.

Pre-packaged insolvency for MSMEs under Section 54A et seq., introduced in 2021, has seen limited uptake. The scheme’s interaction with full CIRP, for non-MSME creditors who object, is being worked out through case law.

Avoidance applications under Sections 43, 45, 49, 50, and 66 have matured as a distinct workstream. The question of who continues the avoidance application after plan approval, the resolution professional, the resolution applicant, or a continuing monitoring mechanism, has been the subject of recent NCLAT attention.

Section 238A limitation remains contested despite the B.K. Educational Services v. Parag Gupta, (2019) 11 SCC 633, line. Acknowledgment of debt under Section 18 of the Limitation Act, continuing cause of action in balance-sheet entries as in Dena Bank v. C. Shivakumar Reddy, (2021) 10 SCC 330, and the interplay with SARFAESI and DRT proceedings produce recurring limitation challenges at Section 7 admission.

The operational reality is that IBC law is no longer “settled”. Several load-bearing questions are open, and current-practice advice assumes continued movement.