The NCLT has admitted a plea for the Corporate Insolvency Resolution Process (CIRP) against a corporate debtor, affirming that SARFAESI proceedings do not prevent a default under the IBC. The operational debt was validated, with no pre-existing disputes established.
NCLT Admission of CIRP Plea
On September 7, 2026, the National Company Law Tribunal (NCLT) admitted a ₹38.28 crore plea for Corporate Insolvency Resolution Process (CIRP), establishing that proceedings under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI) do not restrain a corporate debtor from defaulting under the Insolvency and Bankruptcy Code (IBC).
The NCLT found that the operational debt significantly exceeded the threshold required for initiating CIRP proceedings and confirmed that a default had occurred. Importantly, the tribunal did not find any pre-existing disputes that could invalidate the creditor's claims against the corporate debtor.
“SARFAESI proceedings cannot act as a shield against CIRP actions, especially when the default is established,” ruled the NCLT.
This ruling underscores the independence of the IBC framework from SARFAESI proceedings, reinforcing the credence of operational creditors in seeking insolvency resolution. The court’s decision emphasizes that the presence of operational debt exceeding legal thresholds necessitates CIRP, regardless of ongoing SARFAESI actions.
For legal practitioners, this ruling serves as a clarion call regarding the applicability of SARFAESI and IBC. It outlines that operational creditors can rely on the IBC provisions to enforce their rights even in the midst of recovery actions under SARFAESI.
Citations
- Case Name (2026) NCLT 4
