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Informist, Wednesday, Sept. 30, 2026

 

NEW DELHI – The Supreme Court Wednesday held that insolvency proceedings against a corporate debtor can continue in the larger interests of resolving the debt-ridden company and protecting other stakeholders, even if fraud is detected in the initiation of insolvency proceedings. The resolution process against a company can therefore continue even in the absence of the original petitioner creditor, the court said. At this stage, the original petitioner creditor does not control the proceedings. Instead, the resolution professional and the committee of creditors make joint decisions, subject to approval by the National Company Law Tribunal, the court said.

 

For deciding whether to continue the resolution process, the tribunal will take into account multiple factors, the most important of which is ensuring that future proceedings can be conducted with integrity and with confidence that the purpose and objectives of the Insolvency and Bankruptcy Code, 2016, can be achieved with certainty, probity, and transparency, the court said. The tribunal would be guided by the commercial wisdom of the committee of creditors as well as the submissions of the resolution professional before whom multiple stakeholders would have filed their claims, the court said. 

 

The court said commencement and conclusion of insolvency proceedings occur in two stages. At the initial stage, the original applicant carries the proceedings until the petitions are admitted, it said. Once the petition is admitted, the proceedings are no longer the preserve of the original applicant, creditor or debtor, the court said. They become in rem, with all creditors of the corporate debtor becoming stakeholders in the process. The affairs of the corporate debtor are vested in the resolution professional, and the proceedings come under the tribunal's jurisdiction, it added.

 

If it is proved that the insolvency process was fraudulent and collusive, the tribunal is entitled to recall admission of the application. However, these situations arise only in the early stages, the court said. This is because, when invoking statutory jurisdiction, there is an inherent public law duty not to deceive or mislead on jurisdictional facts, as such manipulation would have the effect of subverting the very purpose and object of the statute, it said.

 

The apex court ordered the insolvency proceedings against Three C Shelters Pvt. Ltd. be restored to its original number before the tribunal. The court said the tribunal should now decide whether to continue the proceedings in light of the conclusive finding of fraud and collusion by the creditor Straight Edge Contracts Pvt. Ltd. with Three C Shelters. For this purpose, it should consider all necessary facts and events, including Three C Shelters' ownership of the Greenopolis project, and hear the resolution professional, the committee of creditors, and other stakeholders, including homebuyers who have already adopted other statutory and judicial remedies, it said.  End

 

Reported by Surya Tripathi

Edited by Saji George Titus

 

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