CIRP Not Barred by Section 10A Where Restructuring Failed to Materialise

Case Details: Power Trust vs. Bhuvan Madan [2026] 183 taxmann.com 568 (SC)

Judiciary and Counsel Details

Surya Kant, CJI, Joymalya Bagchi & Vipul M. Pancholi, JJ.
Joy Saha, Sr. Adv., Pranjit Bhattacharya, Ms Salonee Shukla, Sachin Jain, Advs. & Vaibhav Niti, AOR for the Appellant.
Arvind Nayar, Sanjay Sen, Sr. Advs., Madhav Kanoria, Ms Srideepa Bhattacharyya, Ms Neha Shivhare, Aditya Tanay Pandey, Vikash Kumar Jha, Avinash B. Amarnath, Ms Aakanksha Bhola, Sayandeep Chakraborty, Shivansh Baghel, Advs., Mrs S.S. Shroff & Ms Mandakini Ghosh, AORs for the Respondent.

Facts of the Case

In the instant case, a financial creditor filed an application under section 7 for initiation of CIRP against the corporate debtor on the ground that the corporate debtor had defaulted under a common loan agreement dated 19-6-2013.

The corporate debtor contended that the common loan agreement had been subsequently restructured vide the first restructuring proposal dated 21-2-2020, whereby the first instalment became payable on 31-12-2020, attracting the prohibition under section 10A of the IBC.

It was further submitted that the restructuring proposals dated 21-2-2020 and 29-9-2020 were final and binding between the parties and had novated the earlier common loan agreement dated 19-6-2013. The Adjudicating Authority dismissed the application of the corporate debtor and admitted the section 7 application initiating CIRP.

The Adjudicating Authority dismissed the application of the corporate debtor and admitted the section 7 application initiating CIRP. The NCLAT upheld the order passed by the Adjudicating Authority. Then, an appeal was made before the Supreme Court.

Supreme Court Held

The Supreme Court noted that, as an ameliorative measure, section 10A was incorporated into the IBC, which barred the initiation of CIRP against a corporate debtor in the event of default arising on or after 25-3-2020, for a period of 6 months or such period not exceeding one year as may be notified.

The Supreme Court held that the plea of bar under section 10A was a non-starter as restructuring proposals had not fructified into valid agreements novating original contract and pre-implementation conditions were not complied with – Held, yes – Whether therefore, default date would relate to 31-3-2018 as per section 7 application, and proceeding could not be held to be barred in light of Explanation to section 10A of the IBC.

List of Cases Reviewed

Order of National Company Law Appellate Tribunal, New Delhi in CAAT(I)-81-2024 order dated 25.01.2024 (para 27) affirmed
Innoventive Industries Ltd. v. ICICI Bank Ltd. [2017] 84 taxmann.com 320/[2017] 143 SCL 625 (SC)/(2018) 1 SCC 407
M. Suresh Kumar Reddy v. Canara Bank [2023] 150 taxmann.com 256 (SC)/[2023] 178 SCL 517 (SC)/(2023) 8 SCC 387 (para 38) followed
Vidarbha Industries Power Ltd. v. Axis Bank Ltd. [2022] 140 taxmann.com 252 (SC)/[2022] 173 SCL 355 (SC)/(2022) 8 SCC 352 (para 38) distinguished