SC Bars Use of IBC as Recovery Tool by Decree Holders

Case Details: Anjani Technoplast Ltd. vs. Shubh Gautam - [2026] 185 taxmann.com 816 (SC)

Judiciary and Counsel Details

Pamidighantam Sri Narasimha & Alok Aradhe, JJ.
Dama S Naidu, Sr. Adv., Pankaj Pandey, Girish Tripathi, Digvijay Prasad, Ashish Yadav, Ms Ranjeeta Rohtagi, Advs. & Ms Megha Karnwal, Aor for the Appellant.
Kapil Sibal, S. Niranjan Reddy, Sr. Advs., Ms Shloka Narayanan, Aor, Gaurav Singh, Ms Rajeshwari & Ms Shubhani D Krishan, Advs. for the Respondent.

Facts of the Case

In the instant case, the respondent, a money lender, advanced loans of about Rs. 2.50 crore (12.75% p.a.) and Rs. 2 crore (3% monthly) in 2010. After cheque dishonour and a 2013 compromise, the appellant paid about Rs. 3.53 crore by July 2014. A 2016 summary suit claimed Rs. 4.38 crore; a second compromise fixed Rs. 2.39 crore as full settlement. On 11.01.2018, the Delhi High Court decreed Rs. 4.38 crore with 24% interest from 01.02.2016. Appeals failed up to the Supreme Court in 2021.

In December 2021, the respondent filed a Section 7 IBC plea instead of execution. The NCLT (June 2022) dismissed it, holding a decree holder is not automatically a financial creditor and IBC cannot be used for recovery. The NCLAT (November 2022) reversed this, allowing admission on the basis of time value of money.

Meanwhile, the Delhi High Court directed recomputation of dues and deposit of Rs. 3 crore (paid in November 2022). Tax proceedings and ITAT records showed lower outstanding figures, creating inconsistencies. On appeal to the Supreme Court, the appellant later deposited Rs. 60.99 lakh before the Supreme Court in October 2024.

Supreme Court Held

The Supreme Court observed that a decree for money in favour of a financial creditor would give rise to a fresh cause of action for initiating proceedings under Section 7 of IBC. However, that principle does not operate in a vacuum and does not mean that every decree holder who also happens to be a financial creditor is entitled, as a matter of right, to invoke insolvency process in preference to execution.

Accordingly, the application of this principle must be tested on the facts of each case. The question of whether, in each case, invocation of IBC amounts to misuse of process or use of the Code as a recovery mechanism remains to be examined on facts. Where the respondent, holding a final money decree and having full machinery of civil execution at his disposal, chose instead to invoke insolvency jurisdiction, such conduct was precisely what the Supreme Court in GLAS Trust Company LLC v. BYJU Raveendran [2024] 167 taxmann.com 619/[2025] 187 SCL 14 (SC)/(2025) 3 SCC 625 had characterised as an improper use of IBC, using insolvency as a substitute for debt enforcement and as a means of coercing the corporate debtor into payment.

The Supreme Court held that where the quantum of “debt” itself, as contemplated under the Code, was seriously disputed, initiation of CIRP was nothing more than use of IBC as a recovery mechanism and was an abuse of process. Insolvency process is a remedy with far-reaching consequences and must be reserved for cases of genuine insolvency or financial distress, not for enforcement of money decrees.

List of Cases Reviewed

Shubh Gautam v. Anjani Technoplast Ltd. [2023] 146 taxmann.com 106 (NCLAT- New Delhi) (para 34) reversed
GLAS Trust Company LLC v. BYJU Raveendran [2024] 167 taxmann.com 619/[2025] 187 SCL 14 (SC)/(2025) 3 SCC 625 (para 21)
Tottempudi Salalith v. State Bank of India [2023] 155 taxmann.com 380/[2024] 181 SCL 406 (SC)/(2024) 1 SCC 24 (para 22) followed
Dena Bank v. C. Shivakumar Reddy [2021] 129 taxmann.com 60/167 SCL 453 (SC)/(2021) 10 SCC 330 (para 31) distinguished

List of Cases Referred to

Anjani Technoplast Ltd. v. Shubh Gautam [SLP (C) Diary No. 22264 of 2021, dated 13-12-2021] (para 5)
Kotak Mahindra Bank Ltd. v. A. Balakrishnan [2022] 138 taxmann.com 567/172 SCL 696 (SC) (para 9)
Dena Bank v. C. Shivakumar Reddy [2021] 129 taxmann.com 60/167 SCL 453 (SC) (para 9)
Shubh Gautam v. Anjani Technoplast Ltd. [SLP (C) Nos. 21131-21132 of 2022, dated 28-11-2022] (para 11)
Shubh Gautam v. Asstt. CIT [IT Appeal No. 555 (Kol.) of 2020, dated 1-9-2022] (para 12)
Swiss Ribbons (P.) Ltd. v. Union of India [2019] 101 taxmann.com 389/152 SCL 365 (SC) (para 19)
Pioneer Urban Land & Infrastructure Ltd. v. Union of India [2019] 108 taxmann.com 147/155 SCL 622 (SC) (para 20)
GLAS Trust Company LLC v. BYJU Raveendran [2024] 167 taxmann.com 619/[2025] 187 SCL 14 (SC) (para 21)
Tottempudi Salalith v. State Bank of India [2023] 155 taxmann.com 380/[2024] 181 SCL 406 (SC) (para 22).