Whalesbook
The National Company Law Appellate Tribunal's (NCLAT) recent pronouncements during the first fortnight of January 2026 offer crucial insights into the evolving application of India's Insolvency and Bankruptcy Code (IBC). These judgments address persistent challenges in corporate insolvency, offering clarity for stakeholders navigating complex financial distress.
Personal Guarantees and Demand Notices
The ruling in Ujwal Gupta v. Union Bank of India established that a SARFAESI Act demand notice can serve as valid invocation of a personal guarantee, even if the guarantor is described as a director. This clarifies that the substance of the notice, demanding the guaranteed debt, is paramount, and procedural objections are unlikely to succeed without substantive prejudice.
Creditor Conduct and Debt Inflation
In Chemical Suppliers India Private Limited v. Kanodia Technoplast Limited, the NCLAT sternly criticized operational creditors for attempting to inflate default amounts by adding new invoices post-admission. The tribunal emphasized that willingness of the corporate debtor to pay undisputed debts should be accepted, noting such refusal undermines the IBC's spirit.
Committee of Creditors' Authority
The NCLAT affirmed the Committee of Creditors' (CoC) decision-making power in Anuj Goyal v. Atul Kumar Kinra. A homebuyer with a minor voting share cannot challenge the CoC's majority vote to replace a resolution professional, reinforcing the CoC's central role in the resolution process.
Scope of CIRP and Asset Segregation
Gagan Tandon v. IL & FS Financial Services Limited highlighted that CIRP should be confined to projects securing financial facilities. It cautioned against engulfing unrelated assets, ensuring a focused resolution.
Jurisdiction over Lease Agreements
The Fivebro Water Services Private Limited v. Doshion Private Limited case clarified the Adjudicating Authority's jurisdiction under Section 60(5) to examine lease validity and breaches. This is crucial for asset recovery, especially when leases are used to shield assets from liquidation. The tribunal also deprecated post-moratorium lease renewals by suspended management aimed at removing assets from the estate.
Liquidation of Provident Funds
A significant ruling in Regional Provident Fund Commissioner-II v. Harshavardhan Cotton and Synthetic Mills Private Limited determined that provident fund contributions, including interest and damages, are third-party assets and must be excluded from the liquidation estate. These dues, considered held in trust for employees, take priority over financial creditors, recalibrating asset distribution in liquidation.
Interim Finance Controls
Religare Finvest Limited v. Resolve Support Services Private Limited underscored the need for strict CoC approval for interim finance. Raising funds from related parties without full disclosure, especially when used for professional fees, constitutes a breach of fiduciary duty and such costs may not be recognized.
Bankruptcy Estate Management
In Subhash Chandra Mishra v. Sunil Kumar, the NCLAT clarified that bank account balances vest in the bankruptcy trustee upon a bankruptcy order. Basic domestic needs provisions do not include monetary balances, and amounts claimed to be held in trust require material evidence for exclusion.
These rulings collectively underscore the NCLAT's continued efforts to refine IBC processes, ensuring fairness, transparency, and efficiency in resolving corporate distress across India.