Section 10A IBC Not Applicable to Pre-COVID Defaults; Adjudicating Authority Must Admit Section 7 Petition Once Default Is Established — Supreme Court
Case Name: Power Trust (Promoter of Hiranmaye Energy Ltd.) v. Bhuvan Madan (IRP of Hiranmaye Energy Ltd.) & Ors.
Citation: 2026 INSC 166; Civil Appeal No. 2211 of 2024
Date of Judgment/Order: 18 February 2026
Bench: Hon’ble Mr. Chief Justice Surya Kant, Hon’ble Mr. Justice Joymalya Bagchi and Hon’ble Mr. Justice Vipul M. Pancholi
Held: The Supreme Court held that Section 10A of the Insolvency and Bankruptcy Code, 2016 does not bar initiation of CIRP where the date of default precedes 25.03.2020. Restructuring proposals that are conditional upon fulfilment of pre-implementation requirements do not novate the original loan agreement unless such conditions are satisfied. At the stage of admission of a Section 7 petition, the Adjudicating Authority is required only to ascertain the existence of a financial debt and occurrence of default; issues of business viability or alleged commercial feasibility cannot defeat admission once default is established. The commercial wisdom of the Committee of Creditors in rejecting settlement proposals and approving a resolution plan is non-justiciable except within the narrow confines of the Code.
Summary: The appeal arose from admission of a Section 7 application filed by REC Ltd. against Hiranmaye Energy Ltd. for default under a common loan agreement dated 19.06.2013. The corporate debtor’s account was classified as NPA on 30.06.2018. Though restructuring proposals were approved on 21.02.2020 and 29.09.2020, their implementation was subject to fulfilment of pre-implementation conditions including obtaining a favourable tariff order, creation of a DSRA, maintenance of priority debt, infusion of working capital, and demonstration of operational capacity. These conditions were not fulfilled. The Section 7 application recorded 31.03.2018 as the date of default. The NCLT admitted the application, and the NCLAT upheld the order. Before the Supreme Court, the promoter argued that the restructuring proposals novated the original agreement, shifting the default date within the Section 10A moratorium period (25.03.2020 to 24.03.2021), and that the corporate debtor was a viable running concern. The Court rejected these contentions, holding that the restructuring proposals never fructified into binding agreements due to non-compliance with pre-implementation conditions. Therefore, the default dated back to 31.03.2018 and was not hit by Section 10A. Relying on Innoventive Industries, Swiss Ribbons, E.S. Krishnamurthy, and M. Suresh Kumar Reddy, the Court reiterated that once existence of financial debt and default is shown, admission under Section 7 is mandatory. Vidarbha Industries was distinguished as confined to its peculiar facts. The Court also declined to interfere with the CoC’s rejection of multiple settlement proposals by the promoter and its approval of the resolution plan of Damodar Valley Corporation.
Decision: The Supreme Court dismissed the appeal, upheld admission of the Section 7 application, and vacated the interim stay on CIRP. It rejected the application of SEFL seeking release of the Rs. 125 crore deposited as a condition for stay, directing refund of the deposit with accrued interest to the appellant. Pending applications were disposed of.