Omkara Assets Reconstructi On Private Limited vs. Amit Chaturvedi

Reportable
2026 INSC 189


IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION

Civil Appeal No.11417 of 2025


Omkara Assets Reconstruction Private Limited.
….Appellant
Versus
Amit Chaturvedi and Ors.
….Respondents
J U D G M E N T

K. VINOD CHANDRAN, J.

1. Judicial impropriety vis-a-vis financial rectitude is the moot
question arising in this appeal in the context of the proceedings
pending under the Companies Act, 1956 and that initiated under the
Insolvency and Bankruptcy Code, 2016 (for short, the IBC). The
Stressed Assets Stabilization Fund of the bank who financed
respondent No.2, approached the Adjudicating Authority under the
IBC, the Company Law Tribunal, for initiating Corporate Insolvency
Resolution Proceedings (CIRP) for recovery of an amount of
Rs.154,33,12,274/- with future interest; on the principal of
Rs.10,60,00,000/- disbursed by way of two term loans on 05.04.1999
Signature Not Verified
Digitally signed by
SACHIN KUMAR
SRIVASTAVA
Date: 2026.02.24
17:44:36 IST
Reason:
and 12.12.2000; the default having commenced from 01.01.2003.
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Respondent No.2 resisted the claim on the grounds of pending
proceedings with respect to a Scheme of Arrangement (SOA) under
Sections 391 to 394 of the Companies Act before the Punjab and
Haryana High Court and alleged suppression of such fact before the
Adjudicating Authority.
2. The Tribunal observed that respondent No.2 failed to establish
compliance with the provisions of Section 391 of the Companies Act
and noticing the contention of the appellant that the SOA had become
defunct, invoked the provisions of Section 7 of the IBC based on the
decisions of this Court, with reliance placed on Section 238 of the IBC.
The consequences, including that of moratorium under Section 14
and the prohibitions thereunder were listed out as directions and an
Interim Resolution Professional (IRP) was appointed. Respondent
No.1, the erstwhile director of the Corporate Debtor (CD),
approached the Company Law Appellate Tribunal which kept in
abeyance the application filed before the Adjudicating Authority
until disposal of the proceedings pending before the Punjab and
Haryana High Court. In the present appeal, this Court issued an
interim order reviving the moratorium and permitting the IRP to
resume charge of the CD.
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3. Mr. Neeraj Kishan Kaul, learned Senior Counsel appearing for
the appellant submitted that the proceeding before the High Court is
of no consequence, especially looking at the overriding effect of the
IBC as provided under Section 238. It is pointed out that under
Section 391 there are two motions required before the Company
Court, first an application to call for a meeting of the stake holders
and then to obtain sanction for the scheme, if it is passed with a
majority of three-fourths of the members, present and voting. There
is also prescribed a time for moving the second motion and the
submission of the order of approval before the Registrar of
Companies within the time prescribed, which are statutorily
mandated to bring into force the SOA. This was never complied with
by respondent No.2, thus making the scheme defunct and
unenforceable by reason only of the gross delay. Though consent
was initially granted by the creditors for the SOA, the same was not
acted upon and even before a second motion was moved, the consent
was expressly withdrawn by written communication addressed to
respondent No.2. The proceeding before the High Court is now
contested independently which would not disable the appellant,
whose debts have mounted astronomically from approaching the
adjudicating authority under the IBC for initiating a CIRP.
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4. We were taken through the decisions of this Court which
categorically and unequivocally found the provisions of IBC to have
overriding effect as against the inconsistent provisions in any other
law for the time being in force. It is also submitted that IBC has been
interpreted as a measure, balancing the realization of debts; public
funds, to a reasonable extent while ensuring that the industry/
enterprise is not driven to sure death. The SOA under the Companies
Act having become defunct by the deliberate omissions of
respondent No.2 and the debt having risen astronomically; the
existence of which cannot be disputed, it was perfectly proper for the
Adjudicating Authority to have initiated the CIRP under the IBC. The
Appellate Authority erred in having kept the application under
Section 7 in abeyance, thus suspending the moratorium and putting
the tottering industry back in the hands of the management which
was responsible for its downfall.
5. Ms.Purti Gupta, learned Counsel appearing for the respondent,
on the other hand, urged that the order impugned is not liable to be
interfered with, especially since it promotes judicial discipline and
has not rejected the application under the IBC. The Adjudicating
Authority having been informed of the approval of the SOA under the
Companies Act ought not to have initiated the CIRP. It is pointed out
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that the decisions wherein the proceedings under the IBC were
allowed to be continued can be distinguished insofar as there was no
approved scheme in one of them and in the other, there was a
liquidation proceeding under the Companies Act. When, by consent
of the creditors, a SOA has been arrived at under the Companies Act,
there is no reason to unseat the management by initiation of CIRP and
appointment of an IRP. There is no appeal taken from the stay order
of the Division Bench of the High Court is the further compelling
contention.
6. Mr.Ritin Rai, learned Senior Counsel appearing for the
applicant in I.A. No.54690 of 2026, does not join issue in the appeal
and restricts the applicant’s claim to that filed before the Resolution
Professional to admit the applicant’s entire claim, in the event of the
proceedings under the IBC being continued with.
7. At the outset we have to notice that though we are not in appeal
from the order of the High Court but all the same it has a bearing
especially when the impugned order brings to a complete halt, the
CIRP. We have to look at the consequences of the proceedings before
the High Court being taken to a logical end, to adjudicate upon the
initiation of CIRP under the IBC. Section 391 of the Companies Act
speaks of a compromise or arrangement between a company and
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th
inter alia its creditors if a majority of the creditors representing 3/4
value of the debt, agree to such compromise or arrangement in a
meeting of such creditors present and voting, either in person or
through proxies; which meeting has to be directed by the Court on
an application under sub-section (1) by the Company or any creditor.
On such meeting being called, held and concluded with the required
majority, under sub-section (2) there is a further requirement of
sanction by the Court. The proviso also requires that the order of
sanction made by the Court under sub-section (2) shall have no effect
until a certified copy of the order has been filed with the Registrar.
8. Reference is apposite to The Companies (Court) Rules, 1959
which mandates by Rule 78 that after the meeting of the creditors, the
result shall be reported to the Court by the Chairman within 7 days
or within such time as directed by the Court. This was done as
evidenced from Annexure-1 dated 25.07.2008, the order of the
Company Judge, which also permitted the filing of the second
motion, which had to be done as per Rule 79 within 7 days therefrom.
The sanction obtained from the Judge has to be filed with the
Registrar within 14 days from the date of such order under Rule 81
which alone brings into effect the SOA as provided under the Act. The
respondent Company’s inaction to move the second motion was
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brought to its notice by Annexure A-2 dated 12.03.2009, requiring the
second motion to be filed immediately, failing which withdrawal of
consent to the SOA was also threatened. On the continued inaction
by Annexure A-3 dated 03.07.2009, after almost a year, the creditors
withdrew their consent to the SOA.
9. It was much later, on 23.07.2019 that Annexure A-5 order was
passed by the High Court in the second motion said to have been
filed by the respondent in the year 2009. The filing of the second
motion was also not within the time provided under the Rules. In any
event the SOA based on the dues as on 2008, as has been argued by
the appellant herein, would have become completely unenforceable
in the year 2019. This is especially so when the creditors had initiated
proceedings under the Securitization and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002 (for short,
SARFAESI Act) and also approached the DRT which had issued a
recovery certificate in the original application filed, quantifying the
dues and mulcting the liability of pendente lite and future interest.
10. The predecessor in interest of the appellant herein, the
Stressed Assets Stabilisation Fund of the Industrial Development
Bank of India (for short, the IDBI Bank) moved an application for recall
of the order of sanction, passed by the Company Judge, which was
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allowed by Annexure A-6 dated 02.08.2022. The recall order, as we
see from a bare reading, specifically found the inoperability of the
SOA which enabled settlement of the total dues of Rs.63.19 crores as
on 31.12.2006, while on the sanction being approved in 2019, the total
dues were close to Rs.150 crores. It was also noticed that the
Company Court had no jurisdiction in the matter by virtue of the
coming into force of The Companies (Transfer of Pending
Proceedings) Rules, 2016 and Section 434 (1) (c) of the Companies
Act, 2013. The recall order further observed that the order
sanctioning the scheme failed to notice the reply of one of the
creditors opposing the sanction of the scheme and asserting
withdrawal of the consent earlier granted. The order of recall passed
with sufficient reasoning was stayed by a Division Bench as per
Annexure 7 dated 10.10.2022, observing; albeit incorrectly, that the
creditors with 75% value of the debt had agreed to the scheme.
11. We cannot but observe that the procedural requirements under
the Companies Act and the rules were not complied with by the
respondent and despite the pendency of the proceedings before the
Company Court, we cannot presume that the SOA brought out in the
year 2008 is still feasible, operational and remains reasonable
considering the lapse of time and the deliberate omissions of the
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Company, the respondent herein. The statutory timelines have not
been complied with and at the risk of repetition, we notice various
dates, on the basis of the submission of the learned Counsel
appearing for the respondent that as of now the SOA is in force for
reason of the filing having been done before the Registrar of
Companies in Form No.INC-28.
12. Pertinently the Adjudicating Authority specifically noticed that
the furnishing of the order in the second motion was merely pleaded
and not established by production of the document before the
Adjudicating Authority. Be that as it may, the Resolution at the
meeting of creditors which approved the SOA along with the report
of the Chairperson was taken on record by the High Court on
25.07.2008. Admittedly, no application by way of a second motion
was filed before the High Court within seven days therefrom, as is
required under Rule 78. The order sanctioning the SOA by the High
Court was on 23.07.2019 in an application filed in the year 2009 by
CP No. 89 of 2009, definitely way beyond the prescribed time. There
is no plausible explanation offered by the respondent for the delay
of almost ten years in moving the Court for sanction of the scheme,
the terms of which would have definitely become redundant by mere
passage of time. Yet again, it has to be noticed that even the order
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dated 23.07.2019 prescribed a period of 30 days within which the
order had to be filed before the Registrar of Companies, which was
also not done. The recall of the order dated 23.07.2019 came about
on 11.07.2022, after three years in an application filed by the Stressed
Assets Stabilization Fund in the year 2019 numbered as CA 158 of
2019 in CP No. 89 of 2009. In the intervening three years there was no
filing done, of the order purportedly sanctioning the SOA, before the
Registrar. The recall order was stayed by the Division Bench of the
High Court on 10.10.2022 after which also there was no filing within
30 days, which even if filed would have been beyond the time
prescribed.
13.
Form No. INC-28 now produced before us is seen to have been
filed on 06.07.2023. The Form also indicates the due date of filing
before the Registrar as 22.08.2019, 30 days from the date of order,
which stood recalled and later revived. We cannot find even a
pretense of the timelines statutorily prescribed having been
complied with. The SOA, the terms of which were as on the year 2008,
would have thus become redundant and inoperative as of now or
even in 2023 when the filing was done before the Registrar of
Companies which makes the SOA for all practical purposes defunct.
There would be no reason to stall the IBC proceedings on the ground
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of judicial discipline, based on the pending proceedings before the
High Court. Relevant is also the fact that in the intervening period,
between 2008 and 2019, the creditors had approached the Debt
Recovery Tribunal under the Recovery of Debts and Bankruptcy Act,
1993 (the RDB Act) and also invoked the provisions of the SARFAESI
Act, both of which were specifically noticed by the Adjudicating
Authority. Despite our specific query as to the said proceedings, the
answer of the respondent was evasive, of the respondent having
contested the same without any specific details furnished to us.
14. In considering the order of sanction dated 23.07.2019 issued by
the High Court, we also have to look at the reliance placed by the
Company Judge on a Division Bench Decision of that Court in CAPP
No. 2 of 2017- Alpha Corp Development Private Limited and Euthoria
Developers Private Limited dated 31.03.2017. Therein a joint
application was filed by the two appellants to transfer a mall owned
st nd
by the 1 appellant to the 2 appellant, both Companies. The
application under Sections 391 and 394 was a composite one seeking
dispensation of the requirement of convening a meeting as also
publication of notice of the meeting and also praying for treating the
very same petition as a second motion for sanction of the SOA. The
learned Company Judge who heard the matter reserved it on
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25.10.2016 and on 07.12.2016, the Central Government brought out
the Companies (Transfer of Pending Proceedings) Rules, 2016 which
came into effect on 15.12.2016. Rule 3 required all pending
proceedings related to cases other than winding up to be transferred
to the Tribunal, but the proviso carved out an exception insofar as
those proceedings which are reserved for orders for allowing or
otherwise, which proceedings were not required to be transferred.
The Division Bench found that since the learned Company Judge had
reserved orders on 25.10.2016 in a composite petition, insofar as one
of the prayers made with respect to dispensation of meetings was
finally allowed; what remained for consideration was only the
sanction of the SOA on merits. The Division Bench found no reason to
transfer it to the Tribunal since the application filed fell clearly within
the exception carved out in the Rules of 2016 and the second proviso
to Section 434(1)(c) of the Companies Act, 2013. The Division Bench
also proceeded to consider the sanction by themselves rather than
sending it back to the Company Judge due to the delay occasioned
in the consideration of the SOA.
15. Applying the dictum of the said decision to the present case,
herein the meeting was convened, and the Chairperson had filed the
report before the High Court which was taken on record on
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25.07.2008. There was no second motion filed within the period
prescribed under the Companies Rules and a delayed motion was
made in the year 2009. Nothing was done thereafter and in 2016
specifically on 15.12.2016, the Rules of 2016 came into effect,
requiring the transfer of proceedings to the Tribunal as on that date.
The second motion filed belatedly was pending and ‘not reserved for
allowing or otherwise ordering’. Even if a second motion had been
filed within the time prescribed in the rules, that is within seven days
of 25.07.2008 and the matter was kept pending, after the constitution
of the Tribunal the matter would have to be transferred. In the present
case, admittedly, the application was filed in the year 2009 long after
the statutory time prescribed and since the same was not taken up
even when the rules of 2016 came into force, it should have been
transferred to the Tribunal.
16. We make it clear that the observations are merely prima facie,
but we find no reason to stall the proceedings for initiation of the CIRP
by resorting to the provisions of the IBC, as has been now attempted
by the appellant herein, which would ensure rehabilitation of the
Company. Judicial discipline, though a corner stone of justice, equity
and fairness; ensuring continued public trust in judicial institutions,
cannot be urged by tardy litigators engaged in fractious and opulent
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litigations aimed at jeopardizing public funds and putting the
economy in a hostage situation. In cases having economic
implications like the present one, at stake is not only public funds but
rehabilitation of an industry, in the larger national interest, wherein
financial probity is also of pre-eminence.
17. Learned Counsel for the respondent has sought to distinguish
the decision of the Appellate Tribunal, as approved by this Court, in
1
Sunil Kumar Sharma v. ICICI Bank Ltd. (AT)(Ins.) No. 1158-1162 of
2024 on the ground that there the SOA was pending consideration,
while in the present case, the SOA is approved. It is relevant that in
the cited decision, the Appellate Tribunal held, in the facts of the
case, that the SOA was pending from 2018 to 2024, which scheme had
neither come into effect nor was the debt bifurcated, for transfer to
the Special Purpose Vehicle, taken over by the SPV. In the present
case also, we have already noticed that the SOA of 2008 never came
into operation and the sanction in the year 2019 was without
jurisdiction and after it had become redundant and inoperable for
sheer passage of time, the terms of which having not been complied
with by the respondent company.

1
2025 SCC OnLine SC 145
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18. A. Navinchandra Steels (P) Ltd. v. Srei Equipment Finance
2
Ltd. was sought to be distinguished on the ground that therein a
liquidation proceeding was pending. The learned Judges in the cited
decision looked at the earlier decisions on the subject and reiterated
that the “IBC is a special statute dealing with revival of companies that
are in the red, winding up only being resorted to in case all attempts of
revival fail” (sic para 16). It was also held that the Companies Act is a
general statute with reference to the IBC, which has the status of a
special statute; prevailing, in the event of conflict especially by virtue
of Section 238 of the IBC. Therein, a secured creditor of the Corporate
Debtor had, in enforcement of its debt by mortgage, sold a property,
while standing outside the winding-up proceedings of the Company
Court. This sale was the subject matter of a proceeding in the High
Court, filed by the Provisional Liquidator. Noticing the pendency of
the proceedings before the High Court and the sale of the mortgaged
property, it was held that if the aforesaid sale is set aside, that
particular asset would be resumed to the possession of the
Provisional Liquidator and if upheld, there would be other assets of
the Corporate Debtor which would continue to be in the hands of the

2
(2021) 4 SCC 435
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Provisional Liquidator. Therein, the Bombay High Court reckoning
the proceedings under the IBC had suo motu directed the Provisional
Liquidator to handover the record of the assets to the IRP of the CD
subjected to the Section 7 proceedings. The plea that Section 7 was
merely a subterfuge to avoid moving a transfer application was
rejected. Section 7 was held to be an independent proceeding, which
stands by itself as reiterated in a catena of judgments of this Court,
which had to be tried on its own merits. There was held to be no
suppression employed and the discretionary jurisdiction under the
fifth proviso to Section 434(1)(c) permitting any party to a winding up
proceeding before the High Court, prior to the IBC, to seek for a
transfer to the Tribunal, would be inconsequential once the
parameters of Section 7 and other provisions of the IBC are met. Here,
the reliance is on the second proviso to Section 434(1)(c) which we
have already found to be inapplicable.
19. We in fact notice paragraph 25 of A. Navinchandra Steels (P)
2
Ltd. which is extracted herein below (Para 25):
“25. A conspectus of the aforesaid authorities would show
that a petition either under Section 7 or Section 9 IBC is an
independent proceeding which is unaffected by winding-
up proceedings that may be filed qua the same company.
Given the object sought to be achieved by the IBC, it is
clear that only where a company in winding up is near
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the IBC, which as of now could only be on the debt due in praesenti .
20. As observed, when the Rules of 2016 came into force, the
second motion filed before the High Court under Sections 391 was
pending without any orders passed nor was it reserved for orders
which required the proceeding to be transferred to the Tribunal. We
say this without prejudice to our prima facie finding that the
application for second motion was grossly delayed, beyond the time
prescribed for filing such an application and hence incompetent.
Further as seen from the extract above a compromise or an
arrangement under Section 230 of the Companies Act, 2013 can also
be entered into in an IBC proceeding at the appropriate stage.
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21. We find absolutely no reason to sustain the order of the
Appellate Tribunal, and we set aside the same restoring the order of
the Company Law Tribunal, the Adjudicating Authority under the
IBC. The IRP hence would be entitled to proceed and our interim
direction to keep the management in the loop of the day-to-day
affairs, stands vacated.
22. The appeal stands allowed.

23. Pending applications, if any, shall also stand disposed of.



.……………………………... J.
(SANJAY KUMAR)




..………….…………………. J.
(K. VINOD CHANDRAN)

NEW DELHI;
FEBRUARY 24, 2026.
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