Supreme Court: IBC Proceedings Cannot Be Stalled by Defunct Scheme of Arrangement under Companies Act

Case Name: Omkara Assets Reconstruction Private Limited v. Amit Chaturvedi & Others

Citation: 2026 INSC 189; Civil Appeal No. 11417 of 2025

Date of Judgment/Order: 24 February 2026

Bench: Hon’ble Mr. Justice Sanjay Kumar and Hon’ble Mr. Justice K. Vinod Chandran

Held: The Supreme Court held that proceedings under the Insolvency and Bankruptcy Code, 2016 cannot be halted merely because a Scheme of Arrangement under the Companies Act is pending or claimed to exist, particularly where such scheme has become defunct or inoperative due to non-compliance with statutory timelines. The Court reiterated that the IBC is a special statute having overriding effect under Section 238, and therefore insolvency proceedings can continue even if parallel proceedings exist under the Companies Act.

Summary: The case arose from an application filed before the National Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code for initiation of Corporate Insolvency Resolution Process (CIRP) against a corporate debtor for recovery of debts exceeding INR 154 crores arising from loans disbursed in 1999 and 2000. The corporate debtor opposed the proceedings on the ground that a Scheme of Arrangement (SOA) had earlier been proposed under Sections 391–394 of the Companies Act before the Punjab and Haryana High Court and that the insolvency application suppressed this fact. The NCLT rejected the objection and admitted the insolvency petition, noting that the scheme had effectively become defunct due to non-compliance with statutory requirements. However, the NCLAT stayed the CIRP and kept the insolvency proceedings in abeyance until the High Court decided the pending scheme proceedings. Challenging this order, the asset reconstruction company approached the Supreme Court. The Court examined the statutory scheme under the Companies Act and the Companies (Court) Rules, 1959 and found that although creditors initially consented to the scheme in 2008, the company failed to file the mandatory second motion within the prescribed time and also failed to file the sanction order before the Registrar of Companies within the statutory period. Even when a sanction order was eventually passed in 2019, it came nearly a decade later, by which time the scheme had become unrealistic and unenforceable due to massive escalation of debt and prolonged delay. The Court observed that the scheme had become practically redundant and therefore could not be used as a ground to stall insolvency proceedings. It further emphasised that judicial discipline cannot be invoked to shield a debtor who has delayed compliance with statutory requirements and jeopardised public funds. Relying on earlier decisions including A. Navinchandra Steels Pvt. Ltd. v. Srei Equipment Finance Ltd., the Court reiterated that proceedings under the IBC are independent and aimed primarily at revival of the corporate debtor, and they cannot be subordinated to outdated or ineffective restructuring arrangements under the Companies Act.

Decision: The Supreme Court set aside the order of the NCLAT, restored the order of the NCLT initiating the Corporate Insolvency Resolution Process, and directed that the Interim Resolution Professional continue with the CIRP proceedings against the corporate debtor.