Supreme Court holds that once admission of Section 7 application under IBC is recorded, it is binding and cannot be challenged in collateral proceedings.
SC Affirms Binding Nature of Section 7 Admission in CIRP
The Supreme Court has reaffirmed that once a NCLT admits an application under Section 7 of the Insolvency and Bankruptcy Code, 2016, and initiates Corporate Insolvency Resolution Process (CIRP), the admission order is final and binding. The ruling bars re-litigation of the same issue in collateral proceedings.
The bench upheld concurrent orders from multiple NCLT benches admitting financial creditors' Section 7 petitions. It emphasized that admission is a jurisdictional determination and any challenge must be through timely appeal under Section 61 or Section 62 of the IBC, not through alternative legal remedies.
"The stage of admission closes the threshold enquiry; disputes relating to claim validity must be addressed in the CIRP framework,"observed the Court.
The decision enhances finality in IBC proceedings and curbs multiplicity of litigation. Practitioners must ensure challenges to admission are filed promptly before appellate tribunals rather than seeking reliefs in civil or criminal courts.
Citations
- Insolvency and Bankruptcy Code, 2016, ss 7, 61, 62
