Lenders Law

The Insolvency and Bankruptcy Code, 2016 (“IBC”) enables operational creditors to initiate corporate insolvency resolution proceedings under Section 9 upon occurrence of a default. While the statutory framework remains unchanged, recent admission-stage practices—particularly at the Delhi Bench of the NCLT—signal a clear shift toward enhanced procedural and bona fide scrutiny . 1. Affidavit Affirming Absence of Collusion: A recurring direction from the Tribunal is the filing of a specific affidavit affirming that the Section 9 petition is not collusive . This affidavit typically requires the applicant to declare that: The petition is not filed in coordination with the corporate debtor, its promoters, directors, or related parties; The insolvency process is not being triggered to achieve an indirect or strategic objective, including management change, regulatory arbitrage, or shielding the corporate debtor from other proceedings. This concern is no longer theoretical. In  Hyt...

The Hon'ble Supreme Court’s ruling in  EPC Constructions India Ltd. v. Matix Fertilizers and Chemicals Ltd.   (2025) clarifies that preference shares—however structured—remains part of a company's share capital, and cannot be regarded as "debt". Even if classified as “financial liability” under Ind AS 32, legal character under the Companies Act still governs enforceability. A cautionary tale for investors and creditors relying on redeemable or “put option” structures to secure repayment.  The Case in Brief In EPC Constructions (supra), the appellant had over ₹400 crores in receivables for project work. The appellant/ former operational creditor agreed to convert its dues into 8% Cumulative Redeemable Preference Shares (CRPS)—redeemable in three years. When the respondent/ debtor failed to redeem, the appellant (then in liquidation), through its liquidator, filed a Section 7 petition under the Insolvency and Bankruptcy Code (IBC), claiming default on redemption. Both ...

  The Insolvency and Bankruptcy Code, 2016 (“ IBC ”) created the framework of Information Utilities (IUs) to serve as authenticated repositories of financial information. A record of default from an IU is treated as conclusive evidence under Section 215 of the Code. A recurring issue for creditors is: Should the default be filed with an IU before sending a demand notice, or only before filing an insolvency application? Statutory Position Section 215(2) IBC provides that financial creditors shall submit information of default to an IU. Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016  (" Application to AA Rules ") requires that an application be accompanied by a record of default from an IU “wherever available”. Further, Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017 , as inserted by Notification No. IBBI/2022-23/GN/REG085 dated 14 June 2022, expressly provides that:  “Before filing an applicatio...

1) The NCLAT ruled on several cases related to IBC in July-August 2021, providing clarifications on key issues.  2) In one case, the NCLAT allowed the withdrawal of CIRP proceedings after full payment to operational creditors, noting that mere claims do not constitute default before the CoC is constituted.  3) In another case, the NCLAT held that bank guarantees are the responsibility of banks to release funds, minus amounts provided by CDs, as the assets of sureties are separate from CDs. 4) The NCLAT dismissed several intervenor applications filed prior to CoC constitution, noting the objective of IBC is revival, not just recovery.