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Wide Scope of Taxation Powers: Supreme Court Endorses Gambling-Related GST Amendments-I

June 25, 2026 by Rav Singh

The Supreme Court in Directorate General of Goods and Services Tax Intelligence (HQ) & Ors v Gameskraft Technologies Private Limited and Ors (‘Gameskraft case’) upheld one of the most contested amendments to the Central Goods and Services Tax Act, 2017 (‘CGST Act, 2017’). While the judgment in Gameskraft case is more than four hundred pages long, the effective summary is: the Supreme Court has allowed the Revenue Department to reinterpret settled meanings, introduce new concepts, and make GST demands retrospectively. And the GST demands are so gigantic that online companies will never be able to pay them and effectively shut shop.

The Supreme Court’s judgment, prima facie, looks like an exhaustive analysis on GST, gambling, and related issues. In my view, the Supreme Court’s judgment in Gameskraft case is an elaborate exercise to agree to every argument advanced by the Revenue Department while skipping substantive engagement with crucial issues. To read an analysis of the judgment directly skip to Part-II or read this article for the background and context.

I. Situating Actionable Claims within the GST Universe

(i) Pre-2023 Position

Originally, CGST Act, 2017 applied to actionable claims by virtue of two provisions:

Section 2(52), CGST Act, 2017 defined goods to mean every kind of movable property other than money and securities but included actionable claims. Entry 6, Schedule III, CGST Act, 2017 stated that actionable claims shall not be treated as supply of goods or supply of services except ‘lottery, betting and gambling.’

Thus, only three actionable claims- lottery, betting and gambling – were subject to GST.

Simultaneously, Section 2(17)(vii), IGST Act, 2017 defined ‘online information and database access or retrieval services’ to include ‘online gaming’. Use of the terms ‘gambling’ and ‘online gaming’ suggested that GST laws acknowledged a distinction between the two kinds of activities. Former was categorized with goods while the latter was classified as a service. The different tax rates, before 2023, wherein gambling was subject to 28% GST and online gaming to 18% GST also provided credence to the understanding that both activities were different.

The difference was also informed by the ratio of The State of Bombay v R.M.D. Chamarbaugwala (‘RMDC-I case’). In RMDC-I case, the Supreme Court had held that games that pre-dominantly involved skill were games of skill while if chance was pre-dominant such games constituted gambling. Courts – for example, in Shri Varun Gumber v UT of Chandigarh & Ors (‘Varun Gumber case’) – relying on the test laid down in RMDC-I case held that online fantasy gaming amounted to a game of skill and was not gambling. Judgments such as in Varun Gumber case clarified that online fantasy gaming was not a punishable offence of gambling and influenced their taxability under GST. For example, they provided continued justification for online fantasy gaming to be classified as ‘online gaming’ alongside services and thereby attracting lower GST rates.

The above position of law continued until the Revenue Department took the position that all online money games amounted to gambling. The skill-chance distinction was replaced by the criteria of monetary stakes, i.e., use of monetary stakes in any online game amounted to gambling. And, accordingly, show cause notices were issues to online gaming companies. Equally importantly, the Revenue Department argued that online gaming companies were liable to collect GST on the entire monetary stake placed by players and not merely the platform fee charged by online gaming companies. The Revenue Department’s stance had no basis in the text of GST laws, or secondary legislation, or any judicial precedent. Equating games played for monetary stakes to gambling was a novel stance and deviated from the test laid in RMDC-I case.

The Karnataka High Court – in Gameskraft Technologies Pvt Ltd v Directorate General of GST Intelligence – pointed to weak legal foundation of the Revenue Department’s GST demands and quashed the show cause notices. The High Court held that online rummy, even if played for monetary stakes, did not amount to betting or gambling. And online gaming platforms were intermediaries liable to pay GST at 18% on their platform fee and not the entire value of monetary stakes. The High Court termed the Revenue Department’s demands as arbitrary. The High Court specifically highlighted that the Revenue Department was not able to point to any specific valuation rule which allowed it to levy GST on the entire value of monetary stakes. The Supreme Court’s judgment in Gameskraft case is result of the Revenue Department’s appeal against the Karnataka High Court’s judgment.

In the interim, before the Supreme Court could adjudicate on the appeal, the Revenue Department initiated amendments to the GST laws, specifically CGST Act, 2017 that provided statutory and legal basis to its stance on gambling and GST liabilities of online gaming companies.

(ii) Amendments in 2023

Some relevant amendments made to the CGST Act, 2017 are:

Section 2(80A) and 2(80B) introduced concepts of online gaming and online money gaming. The latter was defined to mean online gaming in which players pay or deposit money or money’s worth in the expectation of winning money or money’s worth. And this was irrespective of whether the outcome was based on skill, chance or both and whether the game was permissible or not.

Simultaneously, Section 2(102A) added the phrase ‘specified actionable claims’ and encompassed six categories: lottery, betting, gambling, online money gaming, horse racing, and casinos. Entry 6, Schedule III, CGST Act, 2017 was amended to state that actionable claims shall not be treated as supply of goods or supply of services except ‘specified actionable claims.’

The net result of the above-mentioned amendments was that specified actionable claims were made taxable under GST laws. And specified actionable claims included online money gaming. Latter included all online games where players played for monetary stakes. Thus, providing statutory basis to the Revenue Department’s stance that online money gaming amounted to gambling.

Alongside, Rule 31B was added to the CGST Rules, 2017 which specified value of supply in case of online gaming. Rule 31B stated that the value of supply in case of online gaming including online money gaming was:

Notwithstanding anything contained in this chapter, the value of supply of online gaming, including supply of actionable claims involved in online money gaming, shall be the total amount paid or payable to or deposited with the supplier by way of money or money’s worth, including virtual digital assets, by or on behalf of the player:

Similar rules were introduced casinos under Rule 31C wherein the face value of bet was specified as the value of supply in all scenarios. And this aligned with Rule 31A under which face value of lottery, betting, gambling, and horse racing was 100% of the face value of the bet or the amount paid into the totalizator.

Rule 31B introduced a new measure of GST relating to online money gaming. The full value of monetary stake was used as the measure to calculate the GST payable and not merely the platform fee collected by online gaming companies. The above amendments introduced in 2023, blunted two aspects of the Karnataka High Court’s judgment: first, that the Revenue Department’s argument that online gaming companies should pay GST on the entire monetary value of stakes was not rooted in any specific valuation rule and that online games such as rummy did not amount to gambling merely because players used monetary stakes.

II. A Four-Pronged Change

While the issues in Gameskraft case can divided into various silos depending on one’s inclinations. To achieve coherence and in respect of brevity, in these two articles I will only focus on four broad issues in the two articles and keep the discussion anchored in online gaming companies.

(i) Definition of Online Money Gaming

The above amendments introduced the novel concept of online money gaming and made the skill-chance distinction irrelevant to GST. States of Karnataka and Tamil Nadu had introduced similar concepts in their gambling laws to regulate online gambling and the Supreme Court was hearing a challenge to those laws analogously. And a via a separate judgment – State of Tamil Nadu v Junglee Games India Private Limited(‘Junglee Games case’) – delivered on the same date as Gameskraft case, the Supreme Court had upheld power of States to use monetary stakes as the relevant criteria to distinguish gambling from permissible activities. And the Supreme Court in Gameskraft case, cited Junglee Games case, and concluded that:

… where online games, including games predominantly involving skill, are played for stakes, the activity attracts the essential characteristics of betting and gambling for the purposes of the impugned levy. (para 49.4)

More details on online money gaming, and the Junglee Games case are in my previous posts here and here. Thus, in this article I won’t repeat the vulnerabilities and limitations of that approach.

Though for the GST context it is relevant to mention that once the Supreme Court in Junglee Games case accepted that use of monetary stakes converted online gaming into gambling, it endorsed the Revenue Department’s view that online gaming companies facilitated gambling. Because most online games such as rummy and poker required players to stake money and online gaming companies earned a portion of the stakes as platform fee.

(ii) Expanded Scope of Actionable Claims

Once online money gaming was held to be gambling, the foremost GST-related issue was about the legislative competence relating to actionable claims. Including but not limited to the Parliament’s competence to include actionable claims within the definition of goods, constitutionality of levy of GST on betting and gambling, and whether online gaming companies even supplied actionable claims to its players. The Supreme Court engaged with the conceptual parameters of actionable claims and upheld all provisions relating to actionable claims.

(iii) Change in Value of Supply

The introduction of new valuation rule was responsible for a significant increase in GST liability of online gaming companies. The new valuation rule was more onerous for online gaming company, which until the 2023 amendments, were paying GST on Gross Gaming Revenue (‘GGR’), i.e., the net amount after deducting winnings from initial wagers. Use of GGR for levying GST is a widely adopted practice in various jurisdictions – as online gaming companies mentioned in their pleadings – since it is the revenue generated by online gaming companies. The change in measure to tax wherein to full value of bets instead of GGR required transformed GST into an extortionary tax. But, the Supreme Court did not examine the issue of valuation/measure of tax in a meaningful manner.

(iv) Nature of Amendment(s): Prospective or Retrospective

The amendments also brought to fore the question of whether they were merely ‘clarificatory’ or ‘substantive’ in nature. Typically, if an amendment is clarificatory courts permit their retrospective application since they do not impose an additional burden on taxpayers. Because clarificatory amendments merely ‘clarify’ the import and meaning of the provision. Substantive amendments, which introduce an additional burden on taxpayers are rarely permitted to be effective retrospectively. While the distinction between ‘clarificatory’ and ‘retrospective’ amendments can, at times, be slippery. In Gameskraft case, the Supreme Court deviated from the Karnataka High Court’s approach where the latter highlighted that the Revenue Department’s demand was not backed by any specific valuation rule. Instead, the Supreme Court focused on taxable event and that actionable claims in betting and gambling were subject to GST even before 2023. And termed valuation rules as merely specifying the tax liability.

I’ve analysed the Junglee Games judgment previously here and here, while the above-mentioned issues that arise from Gameskraft judgment are discussed in detail in Part-II of this article.

However, before I indulge in a typical academic and serious analysis, a short contextual note below to underline nature of the dispute and how the Revenue Department paralyzed an entire sector of the economy and got away with it.

III. Absurdity of the GST Demands

At several places in the judgment, the online gaming companies and casinos pointed to the unprecedented nature of GST demands. For example, Gameskraft was issued a show cause notice demand a payment of Rs 2,09,89,31,31,501/- (Rs 21,000 crores appx) while for the relevant period its revenue was Rs 4,650 crores; substantially lower than the amount sought to be recovered. Clearly an ‘absurd and disproportionate’ GST demand as Gameskraft argued. Similarly, casinos argued that the original GST demand from them was Rs 11,139 crores while their gross gaming revenue was Rs 1,640 crores. Even though the Revenue Department has won the case, they are likely to see only a fraction of the original revenue demand. Because the relevant taxpayers simply do not have the amount of money being demanded by way of GST.

From a strictly revenue perspective, it’s a pyrrhic victory for the Revenue Department where despite winning the case, even realizing a small fraction of the initial tax demand will be a miracle. From a structural perspective the Supreme Court, in its Revenue Department-friendly judgment, has handed the Revenue Department two weapons that can be trained against any sector of the economy: retrospective amendments and a change in measure of tax.

While we are not unaccustomed to the Revenue Department using retrospective amendments to alter statutory text to negate courts judgments. Or otherwise amend and align the provisions to their view and interpretation. In Gameskraft case, the usual retrospective route was combined with a change in measure of tax which substantially altered the tax payable. But the Supreme Court did not examine either issue with the necessary rigor and dismissed the entire tangent of disproportionate GST demands. Instead, chose to focus on narrow definitions of taxable event, actionable claims, and gambling and completely ignoring the unprecedented nature of tax demands. A hyper focus on tax, while ignoring the context, resulted in a judgment that feels intimidating and analytical. But is a generous dole of powers to the Revenue Department.

Anyhow, what did the Supreme Court say specifically? I’ve written about it here.

Quick Comment: Section 29A(c) Disqualification and a Redundant NPA Account

June 18, 2026 by Rav Singh

Introduction

Section 29A(c) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’) makes a person ineligible to submit a resolution plan, if such person, or any other person acting jointly or in concert with such person,-

at the time of submission of the resolution plan has an account or an account of a corporate debtor under the management or control of such person or of whom such person is a promoter, classified as non-performing asset in accordance with the guidelines of the Reserve Bank of India issued under the Banking Regulation Act, 1949 and at least one year has lapsed from the date of such classification till the date of commencement of the corporate insolvency resolution process of the corporate debtor:

The Proviso allows such a person to ‘cure’ the ineligibility by making payment of all overdue amounts with interest thereon and charges relating to non-performing asset accounts (‘NPA account’) before submission of resolution plan. Thus, the disqualification is a de facto and not a de jure disqualification and can be overcome by the concerned person by making the pending payments overdue under a NPA account.

In Cosmic CRF Limited v Myotic Trading Pvt Ltd & Ors (‘Cosmic CRF case’), the Supreme Court interpreted Section 29A(c) and its Proviso to mean that if no dues were pending on date of submission of a resolution plan Cosmic CRF cannot be deemed to be ineligible because of a NPA account which was redundant. The Supreme Court disagreed from the National Company Law Appellate Tribunal (‘NCLAT’) which interpreted the Proviso to Section 29A(c) literally and held that until Cosmic CRF pays pending dues under the NPA account, it was ineligible to submit a resolution plan under Section 29A(c).

Basis of Ineligibility: Literal Reading of Proviso to Section 29A(c)

When Cosmic CRF submitted its resolution plan, financial creditors had already suffered a loss/haircut in respect of another company: Cosmic Ferro Alloys Ltd (‘CFAL’). Financial creditors had declared CFAL as a NPA account, but it had already undergone a successful CIRP. The connection between Cosmic CRF and CFAL was – Aditya Vikram Birla.

Aditya Vikram Birla was the Managing Director of Cosmic CRF.

Aditya Vikram Birla was also a shareholder of CFAL when it was declared a NPA account.

Also, father of Aditya Vikram Birla was a promoter and shareholder of CFAL when it was declared a NPA account.

The Corporate Insolvency Resolution Process (‘CIRP’) of CFAL succeeded when resolution plan of a third party was approved by the Committee of Creditors (‘CoC’) and the National Company Law Tribunal (‘NCLT’). The question was whether Cosmic CRF is disqualified as a resolution applicant under Section 29A(c) because its managing director was a shareholder of CFAL which was declared a NPA account. NCLAT answered in the affirmative.

As per NCLAT, the only way to cure the ineligibility under Section 29A(c) was to pay all the overdue amounts with interest and charges relating to the NPA account. And that resolution of CFAL and transfer of its ownership to another entity via CIRP did not take away the ineligibility of promoters who were responsible downfall of CFAL and caused financial creditors to take a haircut on the loans. The limitation of NCLAT’s view was that the NPA account was redundant in view of completion of CIRP making it unfeasible for Cosmic CRF and its Managing Director – Aditya Vikram Birla – to pay the pending amounts. In fact, there were no pending amounts.

At the same time, NCLAT’s observation were, prima facie, aligned with the Supreme Court’s interpretation of Proviso to Section 29A(c). In Arcelormittal Pvt Ltd v Satish Kumar Gupta (‘Arcelormittal case’), the Supreme Court held that Proviso to Section 29A(c):

… makes it clear that the ineligibility can only be removed if the person submitting a resolution plan makes payment of all overdue amounts with interest thereon and charges relating to the non-performing asset in question before submission of a resolution plan. The position in law is thus clear. Any person who wishes to submit a resolution plan acting jointly or in concert with other persons, any of whom may either manage, control or be a promoter of a corporate debtor classified as a non-performing asset in the period abovementioned, must first pay off the debt of the said corporate debtor classified as a non-performing asset in order to become eligible under Section 29A(c). (para 54)

On a prima facie basis, NCLAT’s order was in consonance with the Supreme Court’s observations in Arcelormittal case. But the Supreme Court in Arcelormittal case was not faced with a situation where the company with NPA account had undergone a successful CIRP. So, NCLAT’s reading of the Proviso to Section 29A(c) was pedantic because it did not distinguish facts in Cosmic CRF case from the facts of Arcelormittal case.

Supreme Court Adopts a More Pragmatic Approach

The Supreme Court disagreed with the NCLAT’s approach and termed its reasoning as ‘fallacious’. As per the Supreme Court, the ineligibility under Section 29A(c) must be reckoned on the date of submission of a resolution plan and applies ‘in praesenti’. And, on date of submission of a resolution plan no dues were pending as CIRP of CFA had already concluded six years ago.

The Supreme Court also relied on Arcelormittal case to further emphasize that the ineligibility attaches at the time of submission of a resolution plan. Though it needs to be kept in mind that in Arcelormittal case the argument was that under Proviso to Section 29A(c) a resolution applicant can cure the ineligibility after approval of a resolution plan. Else, if the resolution applicant pays pending dues of a NPA account at the time of submission, but its resolution plan is not eventually approved by the Committee of Creditors/National Company Law Tribunal it would narrow the limit the no. of resolution applicants. The Supreme Court though held that the ineligibility must not exist at the time of submission of a resolution plan and all pending dues must be cleared at the stage of submission itself. The NCLAT read the dictum of Arcelormittal case literally and insisted on payment, the Supreme Court remarked that the Proviso was not applicable to Cosmic CRF case because no dues under the NPA account were pending.

There were a few additional facts that the Supreme Court interpreted in favor of Cosmic CFR: (i) it was not even incorporated when CIRP of CFAL was concluded; (ii) management of CFAL was under a different entity and Aditya Vikram Birla or anyone connected with him was no in management or control of CFAL; (iii) Aditya Vikram Birla held a miniscule share in CFAL and was neither its promoter or director and all his ties anyways stood severed after conclusion of CIRP.

Clarity on Applicability of Section 29A(c) and its Proviso

In Cosmic CRF case, the Supreme Court reinforced interpretation of Section 29A(c) and its Proviso by clarifying that the ineligibility under the former is relevant only at the time of submission of a resolution plan. And if dues under a NPA account are not pending at the time of submission of a resolution plan then the resolution applicant or a person connected with the resolution applicant cannot be deemed to be ineligible under Section 29A(c). The Proviso will not be applicable if there are no pending dues due to successful completion of CIRP of a company which had a NPA account. The Supreme Court added that:

Since all remaining dues stand extinguished and the company operates on a clean slate, there is no question of such unpaid dues being ‘resurrected’ for the purposes of gauging eligibility in terms of Section 29A. (para 53)

The Supreme Court also reasoned that if NCLAT’s interpretation – of payment of pending dues under a redundant NPA account – is accepted it would result in making Cosmic CRF ineligible to participate in any CIRP in the future. And that would be an irreversible and drastic consequence.

Further, while payment of pending dues under NPA account is necessary to be eligible under Proviso to Section 29A(c), courts cannot insist on the payment if the dues are no longer pending due to successful completion of CIRP. It would be tantamount to diluting the clean slate doctrine and/or forcing the resolution applicant to fulfil an impossible condition. Either is not desirable.

To conclude, the emphasis on ‘in praesenti’ remains a common theme initiated in the Arcelormittal case and reinforced in the Cosmic CRF case. The situation at the time of submission of a resolution plan is the only relevant criteria. While in Arcelormittal case the Supreme Court refused to postpone payment of pending dues to stage of approval of a resolution plan; in the Cosmic CRF case the Supreme Court said a NPA account, made redundant by completion of CIRP, cannot subsequently affect submission of a resolution plan. If no dues under a NPA account are pending at the time of submission of a resolution plan then the resolution applicant is eligible. Else not. This is the interpretation of Section 29A(c) and its Proviso.

Gambling, Skill, and Money: Supreme Court Upends Decades Old Jurisprudence – II

June 15, 2026 by Rav Singh

In Part-I, my focus was on contextualising the dispute and providing a background. In this part, let me focus on the Supreme Court’s observations in Junglee Games case. The Supreme Court sub-divided the issues for consideration into nine different categories. Let me try and group them into five categories and analyse the Supreme Court’s observations on each issue.

I. Scope and Interpretation of Entry 34, List II

The Supreme Court relied on an extract of Constituent Assembly debates where a concern was expressed by some members that people in the State of Bombay (‘as it was then’) play rummy with such high stakes that it amounted to gambling. The Supreme Court cited this excerpt from the debates to hold that even a game of skill such as rummy, if played for money, can amount to gambling. And the Constituent Assembly intended games of skill, involving monetary stakes, to be regulated by States under Entry 34, List II. Relatedly, the Supreme Court held that if States were deprived of the power to regulate betting on games of skill, it would render them ‘powerless to prohibit the activity of betting and gambling.’ (para 223)

While a reference to the Constituent Assembly debates typically enhances the meaning and understanding of underlying Constitutional issues. However, in this case the reference to the Constituent Assembly debates did not serve the intended purpose. The Constituent Assembly members were concerned about preventing gambling and playing rummy was used as an example. The debate was not about the meaning of gambling. In fact, Dr. B.R. Ambedkar only stated that Entry 34, List II was to give States power to regulate gambling without defining what amounts to gambling. The question of what amounts to gambling was answered by the Supreme Court in RMDC-I case. The Supreme Court also observed that if Entry 34, List II is interpreted to exclude games of skill, it would denude States power to regulate games of skill. And, the ‘constitutional position’ needs to be respected. This was a questionable reason because the Constitution only permitted States to regulate gambling and not games of skill in the garb of regulating gambling. If the Constitution only permits States to regulate gambling/games of chance then the boundaries of such regulatory powers also need to be respected. Merely because States will be unable to regulate games of skill is not a justifiable reason to expand the scope of a legislative entry. The Union can always – and already has stepped into regulate online gaming.

II. Re-Interpretation of RMDC-I case

The Supreme Court underlined the import of RMDC-I case and the RMDC-II case. In the former while delineating the scope of games of skill, the Supreme Court had held that if the general public was invited to ascertain the result of an uncertain event then to assess if the game pre-dominantly involved skill or chance, the appropriate standard is common people and not expert statisticians. Relying on these observations, the Supreme Court concluded that:

the Court was cognizant of the fact that while games of skill may be excluded from the term “gambling”, they would still be covered under the expression “betting” as betting is nothing but staking money on the outcome of a future uncertain outcome. (para 245)

The Supreme Court’s conclusion does not follow from the observations made in RMDC-I case. The latter never expressed any opinion about the meaning of betting and only concerned itself with games of skill and games of chance distinction. Also, Supreme Court’s understanding of betting does not distinguish staking by players themselves or third parties. Instead, the Supreme Court – by misreading RMDC-I case – arrived at a generic and broadbrush meaning of betting. The Supreme Court added that:

Both betting and gambling involve the aspect of staking money on an uncertainty. Merely because the risk element is commonly perceived as “taking a chance”, it cannot mean an expression would cover only games of chances. In both Rummy, a game of skill, and Teenpathi, a game of chance, the persons staking on the uncertain outcome, equally risk and “take a chance” on their unknown and uncertain victory. (para 273)

The Supreme Court repeatedly emphasised on two elements in betting: staking of money and the uncertain outcome of game, irrespective of the game involved. Thereby making a clear departure from the jurisprudence post RMDC-I case wherein the pre-dominant element test was crucial to determine the nature of a game and not whether players had placed monetary stakes in a game. Only side-betting by onlookers was prohibited in the Satyanarayana case. But what about the Lakshmanan case where betting on game of skill was also permitted? The Supreme Court distinguished it from the impugned case by underlining that the Lakshmanan case involved betting on horse racing which took place in controlled environments and the exception was narrow and specific to horse racing. For example, betting can only take place on the day or horse racing and in specified physical enclosures inside the horse racing club.

Instead, the Supreme Court pointed that the nature of online games was different and hinted at their restrictive and predatory nature by observing that:

If one examines the online gaming platforms, it is nothing but a systematic inducement technique to ensure a player bet more and more. This is provided in the form of discounts, incentives for repeated betting, incentives for a particular number of victories and of course, as stated above, retaining the winnings upto a particular amount before it could be withdrawn and a prohibition to withdraw the deposited amount before it is turned into winnings by staking the deposited amount repeatedly. (para 279)

The above observations of the Supreme Court would indicate that it viewed online gaming as a separate and independent category. And the nature of conditions and restrictions imposed by online gaming companies played a role in online money gaming being equated to gambling. However, the Supreme Court also added that placing monetary stakes on a game amounted to gambling irrespective of the medium. Thereby, contradicting itself and what was held in the RMDC-I case where monetary stakes were viewed as irrelevant to determine the nature of a game.

The Supreme Court justified its views by stating that it was only clarifying the interpretation of RMDC-I case and RMDC-II case, even if the said interpretation had been followed for more than seven decades. Specifically, the Supreme Court noted that it was trying to correct a misleading argument by online gaming companies that RMDC-I case protected games of skill played with stakes. And as part of the ‘course correction’ the Supreme Court held that:

Explicit gambling, though, while playing a game of skill, would remain gambling and taking protection under an assumed ratio of RMDC-I (supra) would be virtually undoing RMDC-I (supra). (para 286)

Thereby, a Division Bench of the Supreme Court in Junglee Games case found a cover in ‘misinterpretation’ to sidestep a decision of the Constitution Bench in RMDC-I case. An approach that is hard to justify. I would suggest that the Supreme Court’s understanding of gambling is at odds with RMDC-I case and misinterprets its ratio. The RMDC-I case was not being misinterpreted or misread by online gaming companies, but its ratio became inconvenient in wake of several States’ insistence to prohibit online money gaming.

III. Entry Fee, Tournaments, and Stakes

Even though the issue of entry fee in games was not categorised independently by the Supreme Court, it is worth a discussion. One of the claims by online gaming companies was that if money is the criteria to distinguish games of skill from games of chance/gambling then even a chess tournament played after payment of an entry fee would amount to gambling. In response, the Supreme Court permitted entry fee as an exception to the rule that monetary stakes per se convert any game into a game of chance/gambling. But only if the entry fee in a competition does not form part of stakes. If the entry fee forms part of a pool or stakes then it would become gambling. If a pre-determined prize money is awarded to the winners, then the entry fee does not become part of a stake.

Online gaming companies while offered a pre-determined prize money in some cases, a portion of the entry fee was retained by them as platform fees. Even though the online gaming companies did not enter into a contest between the players and only facilitated games by providing a platform, their deduction of money from the total pooled amount worked against them and the Supreme Court held that online gaming companies facilitated gambling. Also, the Supreme Court observed that online gaming companies cannot plausibly contend that they were organising a tournament. Online gaming companies had hundreds of virtual rooms with varying amounts of money and such a scenario is not akin to conducting a tournament. And, again, relying on RMDC-I case held that:

If a promoter is floating a skill-based competition for an entry fee, that per se would not be gambling. If a promoter is floating a chance-based competition for an entry fee, that per se would constitute gambling. This alone is the inference that can be drawn from RMDC-I (supra). (para 279)

The above inference has no basis in RMDC-I case. At no point, in the RMDC-I case did the Supreme Court express any opinion about entry fee and gambling. In fact, one of the reasons Prize Competition Act, 1955 was enacted was that entry fee charged by publications for prize competitions was viewed as a monetary stake as the participants expected to win a huge monetary prize by guessing the correct answers. And their entry fee was viewed by some members of the Parliament as a monetary stake. But the Lok Sabha and Rajya Sabha debates on the Prize Competition Bill, 1955 – which clearly mention entry fee as a monetary stake – find no mention in Junglee Games case. Supreme Court’s observations about entry fee in Junglee Games case are based on its own flawed assumptions and understanding of entry fee. The RMDC-I case is merely used as a cover and observations on entry fee are attributed to it which are not to be found in the case.

IV. State’s Competence under other Legislative Entries

As mentioned in part-I, one of States argument was that even if it is not found competent to enact laws on betting under Entry 34, List II, it could enact such laws under alternate legislative entries. The Supreme Court held that law prohibiting online money gaming could be prohibited by States by relying on Entry 1, List II, i.e., public order. Citing a host of case laws the Supreme Court underlined how the term public order had been interpreted widely by courts. Public order included a state of tranquillity and if anything was detriment to the health and safety of public, States were competent to enact laws to regulate it.

The Supreme Court thereafter made a few generic observations about the wide and easy access to online gaming, attractiveness of online gaming to young people, booming business of online gaming companies due to their reach in rural areas and indicated that a public order question was intricately tied to online money gaming. The aspect of financial health, mental health, and emotional well-being of players was cited to indicate that rampant presence of online gaming had a proximate connection to disrupting public order. And upheld State’s competence to prohibit online money gaming by concluding that:

there is a proximate relation between the said Acts and the mischief they seek to curb and therefore, public order can be invoked to satisfy the competence of the States to enact the impugned legislations. The States have merely taken an effort to enforce the vision of the Constituent Assembly by seeking to protect the future and livelihood of the Population. (para 375)

While Supreme Court’s understanding of public order, its reading of relevant judicial precedents is difficult to find fault with; especially, because addiction with online gaming is a genuine concern that motivated States to prohibit online money gaming. However, the entire issue seemed superfluous once the Supreme Court decided that States could legislate on betting on games of skill under Entry 34, List II. States’ argument about possessing competence under Entry 1, List II was an alternate argument. Yet, the Supreme Court spent considerable space in concluding that States were competent to enact laws on games of skill under Entry 1, List II AFTER it had decided that States could enact such laws under Entry 34, List II.

V. Issues of Manifest Arbitrariness and Disproportionality

The Supreme Court dismissed the argument that amendments suffered from the vice of arbitrariness by stating that once monetary stakes come into the picture, the distinction between games of skill and games of chance is irrelevant. And held that:

… as far as betting and gambling are concerned, a differentiation cannot be made between games of chance and games of skill because the player staking the amount, in both cases, does it with a hope of winning more money than what is staked. (para 305)

The Supreme Court added that the medium, online or physical, is immaterial. If a game if played for stakes then it amounts to gambling. Thus, prohibiting betting on all games was not arbitrary and online money games were correctly classified as ‘res extra commercium’. And the occasion to consider the amendments as disproportionate did not arise since betting on games was also res extra commercium. Thereby refusing to grant online money games protection of Part III of the Constitution.

Confusing Way Forward

The Junglee Games case has decisively shifted the gambling jurisprudence. But cannot be faulted for introducing any significant clarity in gambling law concepts. Despite its obvious limitations and flaws, the Junglee Games case is likely to be a major pivot for two crucial reasons:

Firstly, endorsing monetary stakes as the distinguishing factor between games of skill and games of chance. A proper interpretation of the judgment is that it has preserved the pre-dominant element test laid down in RMDC-I case. A Division Bench of the Supreme Court could not expressly overrule a Constitution Bench judgment. At the same time, the Junglee Games case has added another element to gambling law jurisprudence by interpreting betting to mean staking money on the uncertain outcome of a game. This interpretation allowed the Supreme Court to sidestep binding nature of pre-dominant element test laid down in RMDC-I case. Reconciliation of both judgments is going to be an onerous task and is for future judges and cases.

Secondly, the Junglee Games case has, without expressly stating so, endorsed an intrusive regulatory regime for online gaming. States clearly admitted that online gaming is a complex area and designing a regulatory regime would be financial burden on States. In view of the potential for harm. At the same time, the Supreme Court has also suggested that once monetary stakes are involved it constitutes gambling. Medium – physical or online – is irrelevant. In view of the facts, the Supreme Court has certainly endorsed prohibition of online money gaming. But whether the same can extend to physical games remains to be seen. Though, given the wide canvas that Supreme Court has granted States to implement prohibition on gambling, it would not be surprising if physical games, involving monetary stakes, are next to face the axe of prohibition.

Gambling, Skill, and Money: Supreme Court Upends Decades Old Jurisprudence – I

June 15, 2026 by Rav Singh

I. Introduction

On 27 May 2026, a Division Bench of the Supreme Court – comprising of Justice P.B. Pardiwala and Justice R. Mahadevan – pronounced two inter-related judgments: The State of Tamil Nadu v Junglee Games India Private Limited (‘Junglee Games case’) and Directorate General of Goods and Services Tax Intelligence (HQS) & Ors v Gameskraft Technologies Private Limited & Ors (‘Gameskraft case’). The former upheld prohibition of online money gaming by the States of Tamil Nadu and Karnataka. While the latter upheld constitutional validity of amendments to Central Goods and Services Tax Act, 2017 – introduced in 2023 – which significantly increased the Goods and Services Tax (‘GST’) burden of online gaming companies.

The issues involved are multi-fold and layered, traverse regulation and taxation of online gaming; but once we peel the onionesque layer the dispute narrows down to legal meaning of gambling and scope of State’s regulatory and taxation powers in relation to it. The Supreme Court, in both decisions, was deferential to the State and approved all the statutory and related amendments. Thus, concretizing a bleak future for online money gaming in India. Though most online gaming companies have already shifted base outside India, downsized or shut shop even before the decisions were pronounced. Writing on the wall is, sometimes, not difficult to read.

In this two-part article, I will comment on the Junglee Games case. Part I contextualizes and summarizes the dispute and Part II comments on the Supreme Court’s response to the dispute. I will comment on the Gameskraft case separately with a sole focus on GST related issues.

II. Brief Overview of the Indian Gambling Law Landscape: 1957-2021

For more than seven decades, Indian gambling law landscape has been defined by Supreme Court’s ratio in State of Bombay v R.M.D. Chamarbaugwala (‘RMDC-I case’) with R.M.D. Chamarbaugwala v Union of India (‘RMDC—II case’). I will spare you the details and skip to the relevant part. In RMDC-I case, the Supreme Court endorsed the ‘pre-dominant element’ test to distinguish a game of skill from a game of chance/gambling. The pre-dominant element test means that to determine if a game is a game of skill or a game of chance, it is important to identify which of the two elements is pre-dominant in a game. If skill dominates chance, the game is a game of skill while if it is vice-versa it is a game of chance/gambling. A secondary observation of the Supreme Court in RMDC-I case was that in determining the nature of a game, the perspective of an ordinary common person is relevant and not an expert. If a game involves guessing a correct solution, its difficulty level, for a common person must not amount to taking ‘a shot at a hidden target’. If it is so, it is a game of chance/gambling. A game of skill must require application of skill by a common person, and such skill should pre-dominate the chance element.

The pre-dominant element test stood was central to gambling law jurisprudence for more than seven decades. And it is worth mentioning two relevant judgments of the Supreme Court which endorsed the test. In State of Andhra Pradesh v K Satyanarayana & Ors (‘Satyanarayana case’), the Supreme Court held that rummy is a game of skill since it requires memorizing cards. Thus, rummy was ‘mainly and preponderantly’ a game of skill. However, an important caveat in the Satyanarayana case was that ‘if there is evidence of gambling in some other way’ or ‘the owner of the house or the club is making a profit or gain from the game of Rummy’ then it will constitute an offence. The above caveat was interpreted to mean that ‘side-betting’ is not permitted. If players staked money in a game of rummy to win prize money it was permissible since rummy was a game of skill. Presumably also because players were pre-dominantly using their skill to earn the money. But if the house/club or a third-party placed money on the outcome of such a game of rummy, it was not permitted since it was assumed to be mere speculation. A third party placing monetary stakes on a game of skill was referred to as ‘side-betting’ or betting simpliciter. Though there was no unanimous or specific definition of either term.

Similarly, in Dr. K.R. Lakshmanan v State of Tamil Nadu (‘Lakshmanan case’), the Supreme Court held that horse racing was a game of skill. The Supreme Court also extended the protection of game of skill to wagering or betting on horse racing. The dictum of Lakshmanan case meant that any a third person/onlooker wagering on outcome of a horse race was also indulging in a game of skill and such wagering cannot be classified as a game of chance. While the Lakshmanan case’s observation, prime facie, diverged from the Satyanarayana case; the betting permitted in the former was only in the context of horse racing. But betting on horse racing only took place in specific horse racing clubs, at a specified time and as per the rules of the horse racing club. So, while the Lakshmanan case expanded the scope of game of skill, it was a limited and contextual expansion and did not permit third party betting on all games of skill. Though the Lakshmanan case was also liberally interpreted to mean that betting or placing monetary stakes on games of skill is also a game of skill.

The above position of law was unchallenged until some States took a step to prohibit online money gaming, i.e., online gaming involving monetary stakes and/or a monetary prize. Let me mention two such prohibitions which were subject of the Junglee Games case.

III. 2021 Onwards: The Prohibition of Online Money Gaming

In 2021, Tamil Nadu amended the Tamil Nadu Gaming Act, 1930 while Karnataka amended the Karnataka Police Act, 1963. As per the amendments online gaming intermediaries could constitute ‘common gaming houses’. Relatedly, facilitating betting and wagering through collection or solicitation of bets for distribution of prizes through electronic funds was also made a punishable offence under the respective statutes. Another crucial amendment was that betting and wagering on online games was made a punishable offence. And the offence of betting or wagering was defined to include betting on uncertain events including online games of skill. Prohibiting betting on online games on skill was unprecedented as previously all games of skill – including betting on game of skill – were permissible activities and considered outside the purview of gambling laws.

Prior to 2021, Tamil Nadu Gaming Act, 1930 and Karnataka Police Act, 1963 recognized two kinds of games: games of chance/gambling and games of skill. The former were punishable while the latter were permissible. The amendments of 2021 created a new category – online money games. Any online game which involved monetary stakes was defined as online money game. And all online money games were prohibited irrespective of whether they were a game of skill or a game of chance. Only online games of skill that did not involve monetary stakes remained outside the scope of gambling laws.

To exemplify. In Satyanarayana case – physical rummy was held to be a game of skill. Thus, until 2021, both online and physical rummy if played for money or otherwise was not a punishable offence under the Tamil Nadu Gaming Act, 1930 and Karnataka Police Act, 1963. The amendments in 2021 stated that wagering or betting on online rummy was a punishable offence. Playing online rummy for money was equated to gambling and made punishable. Whether the monetary stakes were those of players or a third party was irrelevant. Equally, gaming intermediaries that facilitated the playing for monetary stakes could be labelled as common gaming houses and be made liable for penalties.

In short: in 2021, States used money to distinguish between online games of chance and online games of skill. Any online game involving money was termed as gambling. But the High Courts held use of money as a distinguishing element was at odds with the pre-dominant element test laid down in RMDC-I case.

IV. High Courts Question a Blanket Prohibition on Online Money Games

The amendments to both the legislations were struck down in Junglee Games India Pvt Ltd v The State of Tamil Nadu and All India Gaming Federation v State of Karnataka by the Madras High Court and the Karnataka High Court respectively. While both the High Courts cited various reasons for not upholding the constitutional validity of both amendments, two reasons are worth mentioning. To begin with, the High Courts reasoned that a blanket prohibition on all forms of online money games including games of skill was disproportionate. A narrowly tailored prohibition was recommended. The legislatures of both States introduced amendments on the assumption that all online games involving monetary stakes amounted to gambling. While a more considered approach would have involved determining which physical games, when played online, partake the character of gambling. If physical poker played for money was a game of skill, then the same game played online for money does not amount to a game of chance/gambling. The High Courts suggested that an inquiry into the surrounding circumstances, identifying the terms and conditions of online games that transformed them into gambling was necessary. And the legislature must accordingly determine which online money games amounted to gambling instead of imposing a blanket prohibition on all online money games.

The High Courts also questioned competence of the States to legislate on games of skill. Entry 34, List II, Seventh Schedule is ‘Betting and gambling’. The High Courts interpreted the two words conjunctively and held that States do not have legislative competence to enact laws on betting alone as betting is not a standalone category. Under Entry 34, List II, States can enact laws only on betting related to gambling. Thus, any laws that prohibited betting on games of skill were outside the purview of State’s legislative competence under Entry 34, List II.

One implication of the above is that, if online games of skill or betting on games of skill are not included within the scope of Entry 34, List II then they cannot be termed as ‘res extra commercium’. In RMDC-I case, the Supreme Court had termed gambling as res extra commercium and undeserving of protection under Part III of the Constitution. But games of skill remained eligible for protection under Part III of the Constitution. Most notably Article 14 and Article 19(1)(g) read with Article 19(6). Thus, any restrictions on games of skill cannot be arbitrary, need to be reasonable and must satisfy the proportionality test. And the High Courts in their respective judgments – concluded that the blanket prohibitions on online money games were disproportionate and struck them down.

States introduced money as the criteria to distinguish online games of chance from online games of skill, but the High Courts cited the pre-dominant element test and held that latter cannot be clubbed with the former only because they involve monetary stakes. The skill-chance parameter remains relevant for online games as well.

Both the States resisted the High Court’s views and in Junglee Games case, filed an appeal and the Supreme Court decided the petitions together since they raised analogous issues.

V. Appeal before the Supreme Court

(a) Justification by States

States justification for prohibiting wagering or betting on online games was multi-pronged. The State of Tamil Nadu relied on financial distress, predatory practices of online gaming companies, suicides, addiction among other similar reasons. And argued that even if States were found to not possess legislative competence under Entry 34, List II it was competent to prohibit the wagering or betting under other legislative entries. For example, public order (Entry 1, List II), public health (Entry 6, List II), or sports, entertainments and amusements (Entry 33, List II).

Further, State’s argument – which proved crucial to fate of the case – was that the phrase ‘betting and gambling’ in Entry 34, List II should not be construed conjunctively. And both terms can be interpreted independently. Entry 34, List II should not be restricted to mean ‘betting on gambling’ denying States authority to regulate betting on games of skill. States argued that a third-person betting on a game of skill is merely guessing the outcome of game and not applying their skill in the game. States are competent to prohibit such betting even if the underlying game is a game of skill.

States also resisted terming the prohibition on betting and wagering as a blanket ban by suggesting that some online games of skill are still permitted. For example, online games of skill which do not involve monetary stakes. Alternatively, a prohibition was justified on the ground that online gaming is a complex area and designing a regulatory landscape was a significant financial burden on States. Thus, States are entitled to impose a ban on betting and wagering on online games and cannot be questioned on the ground for not choosing the ‘least intrusive option’ and violating the doctrine of proportionality.

(b) Online Gaming Companies Resist the Prohibition

Online gaming companies tried to resist the prohibition on wagering and betting by pointing to its wide scope, lack of States legislative competence under Entry 34, List II, and a misapplication of the well-founded distinction between games of chance/gambling and games of skill recognized by the Supreme Court in RMDC-I case.

Online gaming companies’ argument was that betting and gambling (Entry 34, List II) only provides States legislative competence for betting on gambling. And State cannot treat betting as an independent category and legislate for betting on games of skill. The phrase ‘betting and gambling’ must be interpreted conjunctively. The implication, as suggested, above, was that betting on games of skill would not be ‘res extra commercium’ and any restrictions on it would be examined on the touchstone of reasonableness under Article 19(6) and whether they adhere to the doctrine of proportionality.

To support their argument, online gaming companies relied on relevant judicial precedents, especially the Lakshmanan case. Online gaming companies relied on the Lakshmanan case to reinforce the argument that wagering or betting on game of skill is also a game of skill and cannot be included within Entry 34, List II.

Further, online gaming companies argued that it was the Parliament which had competence to regulate online games and fantasy sports. Entry 31, List I: ‘Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication’ covered online games that were solely dependent on the internet. Permitting States to regulate online games would lead to ‘regulatory chaos’ and regulation of online games also involved an inter-State trade element which should be exclusive preserve of the Parliament. Online gaming companies also underlined that they were online gaming intermediaries under the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 and under regulatory purview of Ministry of Electronics and Information Technology of India.

Additionally, online gaming companies argued that the amendments disregarded well-established distinction between games of skill and games of chance as per the pre-dominant element test laid down in RMDC- I case. Merely because monetary stakes were involved in an online game of skill does not convert it into a game of chance. The pre-dominant element test needs to be applied to online games as well to distinguish an online game of chance from an online game of skill. To apply the pre-dominant element test, each game will have to be scrutinized on the skill-chance parameter. Instead, States had chosen to prohibit all online money games, i.e., all online games involving monetary stakes.

VI. ‘Stakes’ Before the Supreme Court

A perusal of the lengthy arguments – which also involved challenge by online gaming companies on grounds of Article 14 – reveals that the entire online gaming sector faced an existential threat. If all online money games were prohibited, the entire revenue model of online gaming companies would come to a halt. And that seemed to be intention of the States. Why?

States of Tamil Nadu and Karanataka put forth allegations of predatory practices by online companies, fears of addiction among general population, mounting debts, and adverse impact on mental and emotional well-being of people. And while States’ concerns should have invited a nuanced regulatory response, a blanket prohibition was an easy and quick solution for States.

Nonetheless, a distillation of arguments of both sides suggests that stakes before the Supreme Court were as follows:

Firstly, relevance of the pre-dominant element test for online gaming. In RMDC-I case, the Supreme Court had laid down the test for a prize competition that invited entries from participants. Whether the test could be seamlessly applied to online gaming or do the latter constitute a separate category of games altogether? The High Courts did not permit ‘medium-based regulation’ and dismissed the States’ argument that online games were a distinct category that can be regulated differently as compared to physical games. However, States insisted that the nature of online games – their pervasiveness, propensity for addictive behavior, constant availability – demanded a separate and customized regulation.

Secondly, understanding and applying dictum of the Lakshmanan case. Players staking money in a game of skill is different from a third-party staking money on the outcome of a game of skill. Former is permissible, but in the Lakshmanan case even the latter was interpreted to be within scope of game of skill in the context of horse racing. Though in the Satyanarayana case side betting or the club earning more money than its expenses was prohibited. These positions needed reconciliation in view of online games especially fantasy gaming.

Thirdly, meaning of betting and whether betting constituted an independent category. Monetary stakes are an essential element of games of chance/gambling but optional in games of skill. Thus, meaning of betting assumes a more crucial role for games of skill. Playing poker without monetary stakes does not involve ‘betting’ by players, but third parties can still ‘bet’ by staking money on the outcome. If players themselves stake money does that count as betting, or does it remain protected under the umbrella of game of skill?

The Supreme Court had a few things to say on all the above though it did not provide adequate or all the answers. Supreme Court’s response is elaborated here.

Piercing Corporate Veil under the IBC: The Alpha Corp Case Reveals Little

May 19, 2026 by Rav Singh

I. Introduction

The Supreme Court in Alpha Corp Development Private Limited v Greater Noida Industrial Development Authority (GNIDA) (‘Alpha Corp case’) permitted piercing of the corporate veil. And allowed assets of subsidiary companies to be included in corporate insolvency resolution process (‘CIRP’) of the parent company. The principle of separate legal personality is not absolute and exceptions to it are either prescribed in the relevant statutory provisions or created through judicial pronouncements. Alpha Corp case is an instance of judicially created exception and needs to be contextualized to determine its impact on future disputes of similar nature.

This article examines Alpha Corp case and refers to existing jurisprudence for piercing the corporate veil under the Insolvency and Bankruptcy Code, 2016 (‘IBC’). Prior to Alpha Corp case, most notable instance of the Supreme Court endorsing piercing of the corporate veil was in Arcelor Mittal Private Limited v Satish Kumar Gupta & Ors (‘Arcelor Mittal case’). I argue that in Alpha Corp case, Supreme Court’s reliance on Arcelor Mittal case ignores the context in which the latter was pronounced. Arcelor Mittal case was pronounced in reference to Section 29A. The language deployed in Section 29A led the Supreme Court to correctly hold that the provision itself permits piercing of the corporate veil. While in Alpha Corp case the Supreme Court permitted piercing of the corporate veil without anchoring it in any specific provision. Instead, in Alpha Corp case the Supreme Court permitted piercing of the corporate veil by almost exclusively relying on facts of the case. The exclusive reliance on facts and no exposition of any legal doctrine should limit precedential value of Alpha Corp case. In the end, I concur with a post elsewhere: Alpha Corp case leaves us with more questions than answers and reveals little about permissible grounds for piercing the corporate veil under the IBC.

II. Brief Facts

CIRP was initiated against Earth Infrastructures Limited (‘EIL’) by one of its financial creditors under Section 7 of the IBC. EIL was undertaking development on three plots of land which were leased to it by GNIDA. On one plot of land EIL was undertaking development through a Special Purpose Company – Earth Towne Infrastructures Private Limited (‘ETIPL’) – in which it held 78% shares and was a lead member. On the other two plots of land, EIL was undertaking development through its subsidiary companies.

As regards piercing of the corporate veil, the resolution applicant’s argument before the National Company Law Appellate Tribunal (‘NCLAT’) was that GNIDA was fully aware that the projects were being executed by EIL. And that ETIPL was nothing but an alter ego of EIL making it a fit case for piercing of the corporate veil. Some of the factors that were underlined were common directors and promoters of EIL and ETIPL, ETIPL not indulging in a separate business of its own, and that under the lease deed it was EIL and not ETIPL that made the requisite payments to GNIDA. The resolution applicant’s interest was to include assets of ETIPL in CIRP because assets of EIL as a parent company, were negligible. The NCLAT refused to lift the corporate veil by relying on Vodafone International Holdings BV v Union of India as well as Jaypee Kensington Boulevard Apartments Welfare Association and others v NBCC (India) Limited and others. In both cases, the Supreme Court had underlined the principle of separate legal personality and held that piercing of corporate veil is permissible only in exceptional circumstances.

Finally, as far GNIDA was concerned it challenged the National Company Law Tribunal’s (‘NCLT’) approval of the resolution plan. GNIDA argued that it had not been informed of CIRP by the resolution professional. The NCLAT refused to accept any of GNIDA’s arguments about lack of information about the resolution plan and non-payment of dues by EIL by remarking that it had not been diligent in seeking recovery of dues. And that GNIDA was mandated to oversee development of plots it had leased to EIL; implying it should have been diligent and demanded its lease payments in a timely manner. Instead GNIDA was negligent and was making delayed demands for pending dues.

III. Relevance of Corporate Veil in Alpha Corp case

GNIDA made the argument that assets of subsidiary companies cannot be made part of assets of the holding company. GNIDA’s arguments for respecting separate legal personalities of parent company and its subsidiaries were based on two pillars:

Firstly, that subsidiary company is a separate legal entity, and its assets are separate under Section 18 of the IBC. Explanation to Section 18 clearly states that assets of the corporate debtor do not include assets of any Indian or foreign subsidiary of the corporate debtor.

Secondly, GNIDA cited the Supreme Court’s observations in BRS Ventures Investments Limited v SREI Infrastructure Finance Limited (‘BRS Ventures case’) where the Supreme Court had clarified that:

A holding company and its subsidiary are always distinct legal entities. The holding company would own shares of the subsidiary company. That does not make the holding company the owner of the subsidiary’s assets. (para 21)

In BRS Ventures cases the Supreme Court was categorical that assets of subsidiary company cannot be included in liquidation estate of the holding company. And this observation stems from a plain reading of Section 18 of the IBC.

However, the Supreme Court in Alpha Corp was not convinced of the need to respect separate legal personality. The Supreme Court noted that while sanctity of independent legal entity must be maintained some circumstances can require piercing of the corporate veil. And it concluded that the facts of Alpha Corp case demanded piercing of the corporate veil because:

… EIL was the main driving force in the development of the projects and in payment of GNIDA’s dues. The subsidiary companies were only a front. (para 56)

Since facts of the case were fit for piercing the corporate veil, the Supreme Court ‘found it unnecessary to deal with’ scope of the term ‘assets’ under Section 18 of the IBC. In my view, this wasn’t an ideal approach. Instead of dismissing relevance of Section 18 of the IBC, the Supreme Court should have engaged with it and asserted that the statutory mandate – wherein assets of a holding and subsidiary companies are separate – is not absolute, and specific facts can permit reading exceptions into the provision. This would have grounded the exception of piercing the corporate veil to a specific provision. And could have informed future decisions where scope of the term ‘assets’ may be under scrutiny. Instead, the Supreme Court relied on a sweeping irrelevance of Section 18.

The Supreme Court also relied on Life Insurance Corporation v Escorts Ltd (‘LIC case’) and Arcelor Mittal case to justify that Alpha Corp case was fit for piercing of the corporate veil. The former laid down a general proposition that piercing the corporate veil should only take place when contemplated by the statute itself, to prevent fraud, prevent tax evasion, and the object sought to be achieved. The Supreme Court in LIC case did not enumerate an exhaustive list of situations where the corporate veil can be pierced, it only laid down the general proposition that piercing of corporate veil should be in exceptional circumstances. And piercing of the corporate veil must ‘depend on the relevant statutory or other provisions.’ And, thus, it is necessary to examine if circumstances in Alpha Corp case justified piercing of the corporate veil in the context of various provisions of the IBC.

IV. Piercing of Corporate Veil: Arcelor Mittal Case to Alpha Corp Case

The Supreme Court, in Alpha Corp case, relied on Arcelor Mittal case for piercing the corporate veil. In Arcelor Mittal case, the Supreme Court held that where a company had been formed to evade legal obligations – to circumvent disqualifications imposed under Section 29A of the IBC – the courts can pierce the corporate veil. However, it is important to underline the factors that contextualize the Supreme Court’s observations.

To begin with, Arcelor Mittal case was pronounced in the context of Section 29A of the IBC. Section 29A which provides for disqualifications for a resolution applicant and itself permits piercing of the corporate veil by disqualifying persons. This is because Section 29A disqualifies persons who act jointly or in concert with persons who suffers from disqualifications. Thus, to ensure that the objective of Section 29A is met, the Supreme Court held that piercing of corporate veil is necessary to determine persons who are acting as resolution applicants. And whether the disqualified persons are not using corporate form to circumvent the disqualifications.

Also, in Arcelor Mittal case the applicant itself had permitted the relevant authorities – the resolution professional and the Committee of Creditors (‘CoC’) – to pierce the corporate veil and determine its eligibility by including the net worth of its shareholders. Thus, when the resolution applicant was determined as ineligible based on its proximity to erstwhile promoter of the corporate debtor, the Supreme Court denied the applicant cover of a separate legal personality. The Supreme Court, in effect, denied the resolution applicant to conveniently support piercing of the corporate veil to become eligible to submit a resolution plan and then use separate legal personality to hide behind the corporate form to avoid disqualification. It was in this context that the Supreme Court pierced the corporate veil, by grounding it in purpose of Section 29A, its scope, and intent. And noted that the principle of piercing of corporate veil can be:

applied even to group companies, so that one is able to look at the economic entity of the group as a whole. (para 34)

Doctrinally, in Alpha Corp case, the Supreme Court’s reliance on Arcelor Mittal case to pierce a corporate veil can be defended by arguing that it is the only way to respect legislative intent. However, legislative intent is an elusive metric if the underlying provision is not examined. The most proximate provisions was Section 18 of the IBC which clearly states that assets of a subsidiary are not assets of the corporate debtor. Legislative intent of respecting separate legal personality is clear from a plain reading of the provision. In fact, one can claim that reading an exception to the rule laid down in Section 18 is deviating from the legislative intent and not adhering to it. All these questions and analyses are absent in Alpha Corp case.

Nonetheless, if one argues that facts of the case necessitated piercing of the corporate veil – and provisions of the IBC are irrelevant – even then grounds for piercing are not sufficiently persuasive.

Two land leases were awarded to subsidiaries of EIL is a matter of fact. And whether they were mere fronts for EIL to secure the said leases is a matter of factual determination and the Supreme Court was of the view that the subsidiaries were alter egos of EIL. Even if one concedes that the above conclusion is justified on facts. But the third lease in favor of ETIPL should have ideally attracted a differentiated approach from the Supreme Court. ETIPL was constituted as a special purpose company because it was one of the conditions of lessor/GNIDA’s scheme. To classify a special purpose company – incorporated to meet conditions of lessor/GNIDA – as a front of EIL and club it with subsidiaries of EIL was not ideal. Unless one can establish that creation of a special purpose company was a way to disguise EIL’s role. The Supreme Court referred to GNIDA’s letter to police authorities acknowledging EIL’s role in development. Even if one accepts that EIL, as a holding company, was the real developer even for land leased to ETIPL, is the GNIDA’s mandatory condition to incorporate ETIPL irrelevant? Yes, if we look at the Supreme Court’s approach but it results in pointing fingers at a corporate for adhering to the prescribed lease conditions. And doesn’t establish that the special purpose company was incorporated to evade any legal or statutory obligations.

Further, if one also admits that, in view of the facts, a conclusion to pierce or not pierce the corporate veil of EIL could have gone either way. But lack of engagement with Section 18, oversight in assessing the context of Arcelor Mittal case resulted in Alpha Corp case being sensitive to facts of the case. Resultantly, the Supreme Court was unable to provide sound parameters or factors that can be invoked to pierce the corporate veil under the IBC. We do not know the grounds that can be invoked to pierce the corporate veil under in a CIRP or liquidation proceedings. Thus, it will be ideal if Alpha Corp case is treated as a decision that was solely based on facts of the case and is not used as a precedent to sidestep scope of assets as provided under Section 18. Not unless the requisite details relating to group insolvencies are included in the IBC and the secondary legislation.

V. Way Forward

One can argue that parent companies operate in an ‘asset-light’ fashion and tend to hold assets through their subsidiary companies. And thus, a CIRP against a holding company may not be fruitful if all its assets are owned by its closely held companies. Necessitating piercing of the corporate veil. There is credibility in the above line of argument. Except that any piercing of the corporate veil is an exception that should be based on interpretation of a statutory provision or carefully delineated judicial parameters. Permitting piercing of the corporate veil solely on facts, without interpreting the provisions in question, and using cryptic mention of judicial precedents does not augur well for a cohesive and coherent jurisprudence. Alpha Corp case does not articulate the parameters well enough for it to be used as a precedent for any subsequent cases. And, it may be ideal if its conclusion is restricted to facts of the specific case.

Bhushan Steel-II Case | Understanding the Supreme Court’s Change of Heart

May 4, 2026 by Rav Singh

Preliminary (Quiz) Notes:

This is a two-part series on the Bhushan Steel saga. In Part-I, I discuss the Supreme Court’s – now recalled – first judgment where it decided to liquidate Bhushan Power and Steel. In Part-II, I discuss the Supreme Court’s subsequent decision to rescue Bhushan Power and Steel.

I’ve created two accompanying quizzes:

Quiz-1 is aligned to Part-I – Bhushan Steel (Recalled) Judgment – Fill in form and,

Quiz-2, aligned to Part-II – Quiz-2: Bhushan Steel (Subsequent) Judgment – Fill in form

Use these quizzes to self-assess your knowledge about these cases. Admittedly, some of the quiz questions go beyond what is discussed in the articles. Choose, whether you want to attempt the quizzes before or after reading the articles!

Introduction

In September 2025, a three-judge bench of the Supreme Court in Kalyani Transco v M/S Bhushan Power and Steel Limited and Others (‘Bhushan Steel-II case’) dismissed appeals filed by ex-promoters and operational creditors against judgment of the National Company Law Tribunal (‘NCLT’). The NCLT had approved resolution plan, but validity of the resolution plan, and delay in implementation of the resolution plan were challenged in the appeals. As elaborated on Part-I, the Supreme Court had in the first instance found various irregularities in the Corporate Insolvency Resolution Process (‘CIRP’). The Supreme Court’s approach in Bhushan Steel-II case and its line of inquiry was significantly different and led to an opposite result: rescue of the corporate debtor, i.e., Bhushan Steel and not its liquidation.

In this article, I proceed as follows: in Part A, I provide an overview of the judgment and summarize crucial factors that the Supreme Court relied on to rescue the corporate debtor; in Part B, I discuss I compare the different approaches of the Supreme Court in Bhushan Steel-I case and Bhushan Steel-II case; and what is reveals and does not reveal about the entire Bhushan Steel saga.

Part A: An Overview of the Judgment

I. Right of Appeal

The successful resolution applicant – JSW- and the Committee of Creditors (‘CoC’) argued that erstwhile promoters of Bhushan Steel did not have a right to file an appeal. While the erstwhile promoters argued that were personal guarantors of loans disbursed to Bhushan Steel and thus were within the ambit of ‘persons aggrieved’. The Supreme Court observed that under Section 62 of the IBC ‘any person aggrieved’ has a right to file an appeal against the National Company Law Appellate Tribunal’s (‘NCLAT’) decision. And the term ‘person aggrieved’ has not been limited or defined. Acknowledging that CIRP and a resolution plan may also impact rights of a guarantor and thereby the erstwhile promoters, the Supreme Court held that JSW and the CoC were not correct in submitting that the erstwhile promoters have no right of appeal.

However, the Supreme Court highlighted conduct of the erstwhile promoters as well as the fact that they had filed various applications in the NCLT after it had heard the matter in detail. And the NCLT had held that the promoters were causing delays in CIRP and imposed a cost of Rs 1 lakhs for causing the delays. Thus, while the Supreme Court acknowledged the right of erstwhile promoters to file an appeal, it also highlighted that they had not played a constructive role in CIRP.

Finally, the Supreme Court added that an appeal to the NCLAT was only available on the grounds mentioned in Section 61. And none of the grounds specified were met the criteria in the impugned case. Notably, this was the only point of convergence in the Supreme Court’s observations in Bhushan Steel-I case and Bhushan Steel-II case.

Further, an appeal before the Supreme Court was not tenable on conjoint reading of Sections 61 and 62. The Supreme Court clarified that apart from the issue of EBITA, findings of the NCLT and the NCLAT were concurrent on all issues. Thus, the erstwhile promoters could have been ‘non-suited’ when concurrent findings by authorities – NCLT and NCLAT – are recorded under a special statute such as the IBC. And in such cases, an interference by the Supreme Court is not warranted unless the findings are ex-facie arbitrary or illegal.

While the Supreme Court could have non-suited the erstwhile promoters and only engaged with the issue of EBITDA, on which NCLT and NCLAT gave contradictory findings, it chose to engage with the contentions on merits.

II. The CoC: Continues to Exist after NCLT’s Approval of the Resolution Plan

A core finding of the Supreme Court in Bhushan Steel-II case was that the CoC does not cease to exist after the NCLT’s approval of the resolution plan. The argument of erstwhile promoters was that the CoC becomes functus officio after approval of the resolution plan by the NCLT. An argument that the Supreme Court accepted but did not provide accompanying reasons. In Bhushan Steel-II case, the Supreme Court though held that a conjoint reading of various provisions of the IBC made it clear that the CoC remains in existence until the resolution plan is implemented. The Supreme Court was of the view that under the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) – Regulation 38 – it was mandatory for the CoC to setup a monitoring committee for supervising implementation of the resolution plan. And the CoC can nominate representatives to the committee. Based on this mandatory requirement, the Supreme Court held that:

It can thus be seen that the legislative intent is to empower the CoC to monitor and supervise the implementation of the resolution plan through the monitoring committee. (para 77)

The Supreme Court then added that in certain cases the resolution plan may not be implemented. Thus, if the CoC ceases to exist after the NCLT’s approval of the resolution plan it may lead to an anomalous situation. The creditors will be left ‘high and dry’ and would not be able to take any steps that are found necessary for realizing its dues from the corporate debtor. And thus, since the CoC has a vital interest in implementation of the resolution plan:

… the CoC continues to exist till the Resolution Plan is implemented or an order of liquidation is passed under Section 33 of the IBC. It will not be out of place to mention that the cloud of uncertainty exists till a finality is given by this Court in the proceedings under Section 62 of the IBC. (para 85)

On a related note, the Supreme Court also addressed the CoC’s power to extend implementation of the resolution plan. The Supreme Court held that the fact that the CoC could extend time for implementation did not mean that the resolution plan was open-ended and contrary to law. Thus, underlining that the CoC had a role to play in implementation of the resolution plan and does not cease to exist and function after the NCLT’s approval.

III. Delay in Implementation of the Resolution Plan

The contentious issue of delay in implementation of the resolution plan was viewed differently by the Supreme Court in Bhushan Steel-II case. In Bhushan Steel-I case, the Supreme Court’s view was that the delay was attributable to the conduct of JSW. While in Bhushan Steel-II case the Supreme Court held that the delay of one and a half years- between the NCLT’s approval of the resolution plan and its implementation was not entirely attributable to JSW. The NCLT’s directions on distribution of EBITDA, and attachment of property by Directorate of Enforcement (‘ED’) under PMLA, 2002, and introduction of Section 32A contributed to the delay. I’ve elaborated on the EBIDTA issue in sub-section IV below, let me address the other issues in this section.

The ED’s order for attachment of property was issued after the NCLT’s approval of the resolution plan. The NCLAT in appeal first stayed and eventually vacated the attachment order. And appeal had been filed in the Supreme Court against the NCLAT’s order. However, the ED continued with PMLA proceedings and argued that the proceedings were for offences committed by erstwhile management of the corporate debtor. Meanwhile JSW insisted on handover of unencumbered assets. The CoC passed a resolution and approved a delayed implementation of the resolution plan. While on account of pendency of proceedings the CoC was not able to handover unencumbered assets to JSW as required under the resolution plan.

In the interim an ordinance was promulgated to introduce Section 32A in the IBC. One of its purposes was to provide immunity against prosecution of the corporate debtor and to prevent action against property of such corporate debtor. But the ED insisted on continuing proceedings against the corporate debtor by insisting that Section 32A did not have a retrospective effect. Scope of the ED’s jurisdiction and effect of Section 32A was clarified by a previous order of the Supreme Court only in December 2024 where it directed the ED to handover unencumbered assets of the corporate debtor. Based on the above assessment of facts, the Supreme Court held that:

It can thus be seen that the delay is neither attributable to the CoC nor to the SRA – JSW. As a matter of fact, both the SRA-JSW and the CoC were making consistent efforts to get the matter sorted out before this Court so as to ensure the expeditious implementation of the Resolution Plan. (para 126)

Thus, the Supreme Court refused to set aside the resolution plan on ground of delay by JSW. The Supreme Court distinguished Bhushan Steel-II case from Jet Airways case where the delay in implementation of the resolution plan was caused by the applicant itself. While JSW was not responsible for delay in implementation of the resolution plan, the surrounding factors, and lack of clarity in the law contributed to the delays.

IV. The EBITDA Question

The Supreme Court had to address the question of who was entitled to EBITDA: creditors or the corporate debtor? The NCLT while approving the resolution plan had held that creditors were entitled to EBITDA. However, NCLAT directed the monitoring committee and resolution professional to make distribution of EBITDA based on Supreme Court’s judgment in CoC of Essar Steel Ltd v Satish Kumar Gupta & Ors (‘Essar Steel case’). The Essar Steel case was pronounced after the NCLT’s but before the NCLAT’s judgment. In the Essar Steel case, the Supreme Court had clarified that EBITDA should be distributed as per terms of the resolution plan.

The Supreme Court noted that the CoC filed an affidavit that EBIDTA should be distributed among the creditors. However, the CoC had taken a contrary stand before the NCLAT. The Supreme Court rejected the CoC’s plea for giving EBITDA to creditors. Firstly, the Supreme Court noted that accepting the CoC’s argument would amount to contravention of Section 31(1) wherein once a resolution plan is approved by the NCLT all claims stand frozen and are binding on all stakeholders. Secondly, the Supreme Court – relying on the Essar Steel case – observed that:

We are of the considered view that unless there is specific provision with regard to distribution of EBIDTA in the RfRP, permitting the CoC to raise a new stand at this stage will be totally inconsistent with the avowed object for which the IBC was incorporated. (para 168)

Due to conflicting decisions of the NCLT and NCLAT on EBITDA, and the CoC’s own contradictory stances there was no clarity on who was entitled to retain EBIDTA. And this the Supreme Court correctly accepted as one of the reasons for delay in implementation of the resolution plan. The question of entitlement over EBIDTA was a crucial one as it affected rights of the resolution applicant, creditors, and, to some extent the validity of resolution plan itself. Clarity on who has a rightful claim over profits generated by the corporate debtor during CIRP could financially impact all the stakeholders. As the Supreme Court concluded:

If we permit the claim not be part of the Resolution Plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a Pandora’s Box and the very purpose of the IBC providing sanctity to the finality of the Resolution Plan duly approved would stand vitiated. (para 187)

Part B: A Brief Comparison of Two Judgments

On a standalone basis, Bhushan Steel-II case is a more considered judgment. And this is not because it resulted in rescue of Bhushan Steel and avoided its liquidation. This is because in Bhushan Steel-II case the Supreme Court applied the law to facts more precisely. In Bhushan Steel-II case, the Supreme Court engaged with the issue of making priority payments to operational creditors under a resolution plan. As per applicable CIRP Regulations, the amount due to operational creditors was nil due to claims of financial creditors. And ex-gratia payments were being made by JSW to operational creditors. In Bhushan Steel case-I, the Supreme Court accepted the contention on face value, held that no priority payment to operational creditors violated the IBC. There was no determination of amounts due to the operational creditors and applicability of CIRP Regulations. But in Bhushan Steel-II case the Supreme Court examined the issue closely and correctly held that operational creditors were being paid ex-gratia.

Equally, JSW was required to infuse upfront equity of Rs 8,550 crores. While in Bhushan Steel-I case the Supreme Court held that JSW did not fulfil its commitment, and no record was brought to its notice. In Bhushan Steel-II case the Supreme Court acknowledged JSW’s argument that commitment was fulfilled by way of Compulsorily Convertible Debentures (‘CCDs’) which are equity instruments. The Supreme Court cited relevant precedents that have held that CCDs are equity instruments. While in Bhushan Steel-I case this entire issue was dismissed in a curt fashion on grounds of evidence.

However, a comparison of both judgments prompts some obvious questions that should be asked. Even if they remain unanswered. For example, in Bhushan Steel-II case the Supreme Court does not even refer to Section 29A. But based on the limited enumeration of facts in Bhushan Steel-I case, prima facie JSW was ineligible to be a resolution applicant, and the resolution professional failed in its duty to ascertain the eligibility. Equally, in Bhushan Steel-I case the Supreme Court took exception to the breach of timelines by the resolution professional and the CoC. The Supreme Court noted that the NCLT should not have entertained the application for approval of the resolution plan once time prescribed under the IBC was breached. In Bhushan Steel-II case, there was no mention of legal implications of breach of time prescribed under the IBC.

In Bhushan Steel-II case, the Supreme Court casts the CoC in a positive light. And underlines its role as an entity that was working to implement the resolution plan by negotiating with JSW. While in Bhushan Steel-I case, the Supreme Court held that the CoC and JSW were colluding, and they timed the implementation of resolution plan to benefit the latter. The delay in Bhushan Steel-II case was attributed to ED’s attachment order, uncertainty about EBITDA, and introduction of Section 32A. How did the CoC’s role transform from colluding with JSW to making bona fide attempts to implement resolution plan is not fully understandable on reading both judgments. Nor did the Supreme Court in Bhushan Steel-II case mention NCLAT’s scope of jurisdiction and interface of IBC with public law. Specifically, if NCLAT had power to vacate an attachment order issued by the ED. This was especially since the ED’s attachment order was a crucial cause of delay in implementation of the resolution plan.

All the above issues, that were central to Bhushan Steel-I case are missing from Bhushan Steel-II case. Reason for such different approaches? It cannot be solely attributable to differing styles of judges involved. Or a different interpretive approach. Especially when issues that were central in the previous judgment do not even find mention in the subsequent judgment. While deciding the review petition, the Supreme Court had mentioned that in Bhushan Steel-I case, arguments which were not advanced were considered. And incorrect factual aspects were also considered. Perhaps, we can attribute the diametrically opposite approaches to differing facts and arguments. But it still does not answer some crucial questions. One of them being: Was JSW eligible to submit a resolution plan?

Conclusion

The Bhushan Steel saga – consisting of multiple judgments, delays, an imminent liquidation that eventually did not materialize provides ample room and grounds to consider and evaluate the IBC’s working. I’ve highlighted some of the learnings in Part-I of this series. Additionally, we also witnessed how elimination of certain facts changed the complexion and nature of issues and the eventual decision. Facts that were central in Bhushan Steel-I case, did not even find mention in Bhushan Steel-II case. The accurate truth as to what transpired is difficult to ascertain due to the hide and seek nature of facts themselves. Clearly, the emphasis and ignorance of same facts cannot be merely about arguments advanced in the Supreme Court. And if the divergent results were influenced by taking the wrong facts into consideration, it speaks a lot about the caliber of not only the judges involved but also the lawyers. Nonetheless, searching for the accurate truth of Bhushan Steel saga may prove to be an unending chase.

Bhushan Steel – I Case | Understanding the Supreme Court’s Liquidation Order

May 4, 2026 by Rav Singh

Preliminary (Quiz) Notes:

This is a two-part series on the Bhushan Steel saga. In Part-I, I discuss the Supreme Court’s – now recalled – first judgment where it decided to liquidate Bhushan Steel. In Part-II, I discuss the Supreme Court’s subsequent decision to rescue Bhushan Steel.

I’ve created two accompanying quizzes:

Quiz-1, aligned to Part-I – Bhushan Steel (Recalled) Judgment – Fill in form and,

Quiz-2, aligned to Part-II – Quiz-2: Bhushan Steel (Subsequent) Judgment – Fill in form

Introduction

On 2^nd May 2025, the Supreme Court in Kalyani Transco v M/S Bhushan Power and Steel Ltd & Ors (‘Bhushan Steel-I case’) directed the National Company Law Tribunal (‘NCLT’) to initiate liquidation proceedings against the corporate debtor, i.e., Bhushan Steel. Supreme Court’s decision was based on multiple factors that had a common theme: disrespect and violation of the procedures and timelines prescribed under the Insolvency and Bankruptcy Code, 2016 (‘IBC’). And almost all entities involved in the Corporate Insolvency Resolution Process (‘CIRP’) were, as per the Supreme Court, guilty of disregarding their statutory duties: the resolution professional, the Committee of Creditors (‘CoC’), successful resolution applicant, the NCLT and the National Company Law Appellate Tribunal (‘NCLAT’).

In this article, I proceed as follows: in Part A, I provide an overview of the judgment and summarize five parameters that the Supreme Court relied on to liquidate the corporate debtor; in Part B, I discuss a few implications of the judgment and the lessons it offers us even if it has been recalled; and, finally in Part C, I mention the Supreme Court’s reason to accept the review petition and recall the judgment.

Part A: An Overview of the Judgment

I. Suppression of Facts about Disqualification under Section 29A

To begin with, the Supreme Court pointed out that the resolution professional – and thereafter the CoC and the NCLAT – did not discharge their duty of verifying that JSW, the successful resolution applicant, was eligible to submit a resolution plan under Section 29A. Regulation 39(1), Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (‘CIRP Regulations’) requires a resolution applicant to submit a resolution plan along with an affidavit stating that it is eligible to submit a resolution plan under Section 29A. The resolution professional is required to certify that the resolution applicant has filed such an affidavit and submit a compliance certificate in ‘Form H’. The Supreme Court noted that the resolution professional did not complete this obligation. Also, the resolution professional did not submit the certificate or produce any statement about eligibility of the resolution applicant. The omission of compliance certificate, as per the Supreme Court, raised serious doubts about eligibility of JSW to submit a resolution plan. What added to the Supreme Court’s doubt was that the NCLAT ‘encouraged suppression of facts’ about JSW’s ineligibility to submit a resolution plan under Section 29A. The ineligibility had apparently arisen due to a prior joint venture agreement between JSW, Bhushan Steel, and Jai Balaji. Which evidently made JSW a ‘related party’ to Bhushan Steel and ineligible to submit a resolution plan under Section 29A. But the Supreme Court said that the NCLAT sought to justify suppression of facts by JSW about its ineligibility thereby contravening the IBC. But the Supreme Court did not specify how exactly the NCLAT encouraged suppression of facts about the ineligibility.

II. Right of Appeal Only on Limited Grounds

Section 61 of the IBC grants a right to ‘any person aggrieved’ by the NCLT’s order to file an appeal to the NCLAT. And Section 62 uses the same expression for an appeal to the Supreme Court against an order of the NCLAT. Thus, there is no rigid locus requirement to institute an appeal to the NCLAT or to the Supreme Court. The Supreme Court in Bhushan Steel-I case held that CIRP proceedings are in rem and all stakeholders are permitted to file an appeal before the NCLAT or the Supreme Court. And erstwhile promoters and successful resolution applicants are stakeholders in a CIRP. To this effect, the Supreme Court relied on a similar interpretation adopted in GLAS Trust Company LLC v BYJU Raveendran & Ors. However, the Supreme Court pointed out that an appeal can be filed only on the grounds specified in Section 61 or Section 62, whichever is applicable.

In the impugned case, the NCLT had approved the resolution plan of JSW, but subject to certain conditions. JSW, despite its plan being approved, filed an appeal in the NCLAT against the NCLT’s decision. This was unusual and the Supreme Court disapproved the NCLAT hearing this appeal for three reasons.

Firstly, the Supreme Court noted that since the NCLT approved JSW’s resolution plan:

‘Hence, JSW as such, could not be said to be the “person aggrieved” by the order of NCLT approving the Resolution Plan of JSW itself.’ (para 14)

But JSW was aggrieved by some conditions imposed by the NCLT while approving the resolution plan. Thus, we can make an argument that JSW could legitimately claim status of an aggrieved person despite being the successful resolution applicant.

Secondly, the Supreme Court noted that none of the grounds for appeal enlisted in Section 61(3) existed. Thus, JSW could not have filed an appeal before the NCLAT.

Thirdly, the Supreme Court added that the NCLAT erred in admitting JSW’s appeal which was not legally maintainable. And the NCLAT then compounded this error by modifying conditions in the resolution plan as requested by JSW. The Supreme Court particularly failed to understand the NCLAT’s directions where it declassified Bhushan Steel as a promoter of another company – Nova Iron Steel. The NCLAT noted whether Bhushan Steel has 25.6% shareholding in Nova Iron Steel is a question of fact. But ‘if there is any such share’ Bhushan Steel on approval of the resolution plan declassified as a promoter. The NCLAT’s power to issue such an order declassifying promoter and the rationale for the order were correctly questioned by the Supreme Court.

III. Vacation of Attachment Order Nullified

Five days after the NCLT approved the resolution plan of JSW, Directorate of Enforcement provisionally attached assets of Bhushan Steel under Section 5 of The Prevention of Money-Laundering Act, 2002 (‘PMLA’). The NCLAT declared the attachment as illegal and without jurisdiction. The Supreme Court held that it was the NCLAT instead that did not have jurisdiction to vacate an attachment imposed under a public law such as the PMLA.

The Supreme Court observed that the NCLT and the NCLAT were creatures of the statute, i.e. Companies Act, 2013. And jurisdiction of both bodies is circumscribed under Section 31 and Section 60 of the IBC. And neither of the two entities have powers of judicial review over decision taken by a statutory authority in the realm of public law. In this respect the Supreme Court relied on M/S Embassy Property Developments Private Limited v State of Karnataka & Ors (‘Embassy Property case’). In Embassy Property case, the Supreme Court had interpreted scope of Section 60(5) which provides jurisdiction to the NCLT on any question of law or facts ‘arising out of or in relation to the insolvency resolution …’. The Supreme Court held that a decision by a statutory authority in the realm of public law cannot be brought within the fold of ‘arising out of or in relation to the insolvency resolution’. And, if the corporate debtor must exercise a right that falls outside the purview of IBC, they cannot go to the NCLT for enforcement of such a right. Only the relevant public law framework must determine the rights and not the IBC.

Based on ratio of the Embassy Property case and scope of Section 60(5), the Supreme Court held that:

The PMLA being a Public Law, the NCLAT did not have any power or jurisdiction to review the decision of the Statutory Authority under the PMLA. (para 30)

The Supreme Court thus declared the NCLAT’s order of vacating the attachment as without any authority of law and without jurisdiction. Also, the attachment order issued under the PMLA was subject matter of challenge before the Supreme Court in the Special Leave Petitions filed by the CoC. The Supreme Court had stayed the attachment order. But, despite that the NCLAT went ahead and reviewed orders of attachment and recorded findings on Section 32A. The Supreme Court frowned upon the NCLAT’s approach where it did not defer to the Supreme Court and did not wait for it to pass its final decision on the issue.

IV. The CoC’s Role and Conduct

The CoC, as per the Supreme Court performed a questionable role in CIRP on three counts: approving a resolution plan that did not incorporate mandatory conditions prescribed by the IBC, a handful of financial creditors granting extensions to JSW during implementation of the resolution plan, and a change in its stance about the resolution applicant’s conduct especially delays in implementing the resolution plan.

The Supreme Court examined the resolution plan and held that it contravened a mandatory condition under Section 30(2)(b) of the IBC, i.e., the operational creditors must be paid on priority. And despite the resolution plan not providing for priority payments to operational creditors the resolution professional and the CoC approved it. Equally, the Supreme Court emphasized other mandatory requirements: completing CIRP within the time prescribed under Section 12, ensuring compliance of Section 29A, ensuring that the resolution plan is feasible and viable, and that the resolution applicant had capability to implement the resolution plan within the time limit are mandatory requirements under the IBC read with relevant CIRP Regulations. But the Supreme Court questioned if the CoC had exercised its commercial wisdom in approving the resolution plan which was in violation of various mandatory conditions and held that:

If the Resolution Plan does not comply with such mandatory requirements and such plan is approved by the CoC, it could not be said that the CoC had exercised its commercial wisdom while approving such Resolution Plan. (para 73)

While commercial wisdom of the CoC is non-justiciable but if the CoC’s decisions are in contravention of the IBC, courts can and should intervene. And the Supreme Court in Bhushan Steel-I case justified its review of the CoC’s decision by pointing at various violations of the IBC.

The Supreme Court also questioned the CoC’s role during the implementation phase of the resolution plan. The CoC its affidavit had levied multiple allegations against the JSW and its conduct including but not limited to delay in upfront payments, willful breach of the resolution plan, misuse of the legal process, and CIRP taking more than 35 months in a high-stake corporate insolvency case. However, when JSW, at a belated stage – after almost two and a half years – offered the upfront amount, the CoC accepted it without any demurrer. Even though the effective date for implementation of the resolution plan had expired. The Supreme Court taking note of the CoC’s change in stance concluded that it lacked bona fide, had played foul and not exercised its commercial wisdom in the interest of creditors. And the Supreme Court concluded that JSW also delayed implementation of the resolution plan, unjustly enriched itself and thereafter when the market conditions were suitable, it complied with the resolution plan by colluding with the CoC and the resolution professional.

Finally, under the resolution plan, JSW had agreed to infuse equity for an amount of Rs 8550 crores in the corporate debtor on the effective date. However, the Supreme Court noted that apart from averments of the advocates, there was no material to show that the resolution applicant had fulfilled the condition of infusing equity. And, if the effective date for equity infusion was extended, the Supreme Court questioned as to who approved the extension. The reason for this question was that as per the Supreme Court the CoC had become functus officio on the NCLT’s approval of resolution plan. Thus, some financial creditors claiming to be part of the CoC had no authority to grant an extension after the NCLT’s approval. This was despite there being clarity that the resolution plan permitted the CoC to grant time extension to the successful resolution applicant. But the Supreme Court was convinced that the CoC becomes functus officio on the NCLT’s approval of the resolution plan. But it did not elaborate as to why and as per which provisions of the IBC did the CoC become functus officio.

V. Failure of Resolution Professional and Breach of Timelines

The resolution professional’s various omissions are mentioned in significant detail in the judgment. I’ve referred to the oversight in ensuring eligibility of the resolution applicant in sub-section I above. But fatal omission of the resolution professional, as per the Supreme Court, was not obeying timelines prescribed in the IBC and not following the prescribed procedures. For example, the resolution professional did not seek an extension from the NCLT when CIRP was not completed within the time prescribed under Section 12. Further, the resolution professional provided no justification as to why once the CoC had approved the resolution plan; it waited for four months to seek the NCLT’s approval. Especially since the maximum period for completing CIRP had expired when application for the NCLT’s approval was filed. Taking the view that completion of CIRP within the prescribed time is mandatory, the Supreme Court held that:

In that view of the matter, we have no hesitation in holding that the Application submitted by the Resolution Professional seeking approval of the Resolution Plan of JSW under Section 31 being hit by Section 12 of IBC, the NCLT had committed grave error of law in approving the said plan … (para 57)

Based on all the aforementioned factors, the Supreme Court rejected the resolution plan submitted by JSW. And directed the NCLT to initiate liquidation proceedings against the corporate debtor under Section 33 of the IBC.

Part B: Implications of Bhushan Steel-I Case

I. Entire IBC Ecosystem under the Scanner

The Supreme Court in Bhushan Steel-I case revealed various flaws in the IBC’s ecosystem. The CoC and the resolution professional seemed to have acted in contravention of or at least were casual in fulfilling their statutory duties. One reason for this was lack of any meaningful oversight from the judicial authorities. The NCLT and the NCLAT did not properly scrutinize their actions on the touchstone of legality. The judgment also revealed the lack of clear duties and roles during implementation of the resolution plan. The CoC, as per the Supreme Court ceased to exist once the NCLT approved a resolution plan. Thus, leaving no meaningful entity to oversee implementation and compliance with the resolution plan. In several paragraphs of the judgment there are various grains of truth that should have and still should be fruit of contemplation for the policy makers and the Insolvency and Bankruptcy Board of India (‘IBBI’). Though there have been some changes in regards to implementation of the resolution plan.

II. Timelines Overpower the IBC

Breach of the IBC’s prescribed timelines is stale news and reasons for delay may not have an immediate cure. But it is worth contemplating to what extent should the breach of timelines be judicially tolerated and what should be consequence of the breach. Which is better: timely liquidation or a prolonged attempt at rescuing the corporate debtor? The Supreme Court in Bhushan Steel-I case preferred liquidation. The IBC’s design has been recently altered to restore CIRP and delay liquidation if rescue of the corporate debtor is possible. But it may not be ideal as I’ve previously argued elsewhere. While the Supreme Court in various judgments has exhorted importance of time in the IBC, what should be the ideal judicial approach if timelines are breached is still a big unknown. In Bhushan Steel-I case, the Supreme Court preferred liquidation due misconduct of all entities involved and because it took the view that timelines under the IBC are mandatory and not directory. Also, because JSW tried to present a fait accompli by delaying implementation of the resolution plan.

III. Conduct of the CoC and the Resolution Professional Needs Guardrails

The Supreme Court in Bhushan Steel-I case also revealed that while the resolution professional and the CoC have crucial roles in the IBC, the guardrails for ensuring that they perform their duties adequately are missing. Ideally, the NCLT and the NCLAT should act as a check on any tendency to derelict duty, but that did not happen in this case. The IBBI can initiate disciplinary proceedings against the resolution professional, but it may prove to be ineffective unless it takes place in a timely fashion and has a deterrent effect. Equally, while there has been some attempt to bring more transparency in working of the CoC by mandating it to record reasons for its approval. But there has been a simultaneous expansion of its responsibilities that inter alia involve overseeing liquidation. Encouraging transparency though is likely to infuse more confidence in the integrity of CIRP. But it comes with the danger of more challenges and judicial authorities slipping into the territory of reviewing commercial wisdom of the CoC.

IV. Checking Bona Fides of the Resolution Applicant

Finally, the challenge of holding the successful resolution applicant accountable was also revealed by the Bhushan Steel-I case. While the IBC has been recently amended to allow for a more structured supervision of the resolution plan. And by extension conduct of the successful resolution applicant. However, it is undeniable that delays in implementation of the resolution plan due to a recalcitrant resolution applicant can upturn the entire CIRP. Thus, ensuring bona fides of the resolution applicant and their capacity to implement the resolution plan ex ante is crucial instead of sacrificing the corporate debtor at the altar of liquidation due to failure in implementing the resolution plan. It was partly due to oversight in ex ante verification of the resolution applicant’s bona fide that the implementation of resolution plan was delayed which prompted the Supreme Court to order liquidation. While there are adequate safeguards in the IBC in this respect – especially Section 29A – ensuring compliance with its mandate needs to be insisted without fault.

Caveat: The caveat for the entire set of comments above is, of course, that the judgment was recalled. Though, in my view, an academic purpose is still served by commenting on a recalled judgment.

Part C: Recall of the Judgment

Approximately three months after the judgment in Bhushan Steel-I case, the Supreme Court accepted the review petitionwhich challenged correctness of the judgment. The Supreme Court found that it was a ‘fit case for recalling the judgment under review and reconsidering the matter afresh.’ The Supreme Court, in its brief order, mentioned that in Bhushan Steel-I case: (a) various incorrect factual aspects were taken into consideration; and (b) arguments which were not advanced were considered while delivering the judgment.

The judgment in Bhushan Steel-I case had already been stayed, but acceptance of the review petition was a final nail in the coffin. And recall of the judgment ensured that all questions of law remained open for both parties to argue at the stage of final hearing.

Which brings us to Part-II and the Supreme Court’s judgment where it rescued Bhushan Steel instead of liquidating it.

IBC (Amendment), 2026 Series – VI | An Overview of the CoC’s Evolving (and Expanding) Role

April 27, 2026 by Rav Singh

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) – inter alia – expands role of the Committee of Creditors (‘CoC’) in the Insolvency and Bankruptcy Code, 2016 (‘IBC’). The most notable expansion is that the CoC will oversee liquidation of the corporate debtor. This is in addition to the CoC’s existing responsibility to oversee the Corporate Insolvency Resolution Process (CIRP). Further, while the IBC Act, 2026 does not add a specific provision to this effect, it also does not detract from the Supreme Court’s observations in Kalyani Transco v M/S Bhushan Power and Steel Ltd and Others (‘Bhushan Steel case’) where it was held that the CoC will continue to exist until the resolution plan is implemented. Thus, the CoC will play a role even at the stage of implementation of a resolution plan.

The IBC Act, 2026 apart from introducing additional responsibilities for the CoC also introduces one notable obligation. Hereon, the CoC is mandated to record reasons for its approval of the resolution plan under the amended Section 30(4). But curiously, while the CoC has power to recommend liquidation before confirmation of a resolution plan under Section 33(2). This decision to liquidate need not be accompanied by recording of reasons. Parity in both provisions would have been ideal. While recording reasons of approval is not, per se, an onerous obligation it is a step in the right direction. Recorded reasons will ensure transparency in decision making by the CoC. In my view, it will enhance trust in CIRP especially of the unsuccessful resolution applicants. Though courts will have to be careful to not use the recorded reasons to – directly or indirectly – judicially review commercial wisdom of the CoC. Judicial remit must remain limited to examining the CoC’s decisions on the touchstone of legality.

The CoC – since inception – was envisaged as a central actor in CIRP. The IBC Act, 2026 preserves original design of the IBC, but underlines the CoC’s pre-eminent role by assigning it additional responsibilities. This article examines the CoC’s expanded role after the IBC Act, 2026 and various implications that arise from its expanded role. Given the CoC’s multi-faceted role, there are various strands of its working that can be elaborated on, but in the interest of brevity and coherence I’ve chosen only two strands in this article: firstly, the CoC’s obligation to provide reasons for approval of a resolution plan; secondly, the CoC’s power to oversee liquidation of the corporate debtor.

Admittedly, the CoC will also decide if CIRP should be restored and will also have a role – though not clearly delineated – in implementation of the resolution plan. But I’ve examined both these aspects separately in my previous post here and here. So, I will steer clear of both these aspects in this article.

The CoC Must Provide Reasons for Approval of a Resolution Plan

The IBC Act, 2026 amends Section 30(4) which now states that:

The committee of creditors may approve a resolution plan by a vote of not less than sixty-six per cent of voting share of the financial creditors, and record reasons for its approval, after considering its feasibility and viability …. (emphasis added)

As emphasized, the IBC Act, 2026 has added the phrase ‘and record reasons for its approval’. This amendment was not proposed in the IBC (Amendment) Bill, 2025 and neither does it find place in Report of the Select Committee on the IBC (Amendment) Bill, 2025 (‘Select Committee Report’). Thus, there are no reasons on record as to why the CoC has been mandated to record reasons for its approval of a resolution plan. One possible deduction is that Section 30(4) was amended to improve transparency in the CoC’s decision making. A normative reason is that the IBC’s design is premised on commercial wisdom of the CoC. The CoC is expected to utilize its commercial expertise and take decisions that secure the collective interest of all stakeholders. Thus, mandating the CoC to record reasons for its decisions ensures that the IBC’s premise and expectations of all stakeholders are met and the CoC does not use commercial wisdom as an opaque curtain to prevent accountability of its decisions.

The more proximate reason for the above amendment could be some judicial precedents where the CoC has been specifically mandated to record reasons for its decisions. The most notable case in this respect is Elegna Co-op Housing and Commercial Society Ltd v Edelweiss Asset Reconstruction Company (‘Elegna Co-op Housing case’) where the Supreme Court approved the NCLAT’s order directing the CoC to record reasons. The NCLAT had observed that while commercial wisdom of the CoC is not amenable to judicial review, it carries a ‘corresponding duty of responsibility.’ And mandated the CoC to record cogent reasons when it took a non-routine or an extraordinary decision. The NCLAT’s observations were approved by the Supreme Court without any change. While the NCLAT waded into regulatory domain by mandating the CoC to record reasons despite no statutory mandate. However, the NCLAT kept its intrusion limited by mandating recording of reasons only for ‘non-routine’ or ‘extraordinary’ decisions. Amendment to Section 30(4) has created a broader obligation for the CoC to record reasons for its approval and is not limited to only extraordinary decisions.

The statutory mandate to record reasons under Section 30(4) is certainly reconcilable with the doctrine of commercial wisdom of the CoC. The doctrine of commercial wisdom and non-justiciability of the CoC’s decisions apart from attributing business expertise to the CoC also presumes that it will act in a bona fide manner and not take arbitrary decisions. Mandating the CoC to state the reasons for its decisions is a welcome step especially in wake of some recent developments where unsuccessful resolution applicants have challenged rejection of their resolution plans and cast aspersions on the CoC’s intent and decision making. And without recorded reasons it is difficult to know or hold the CoC accountable lending its entire decision making process an unnecessary mystical quality. Finally, though amendment to Section 30(4) is a welcome step, a note of caution is needed. Courts in scrutinizing reasons for the CoC’s decisions, should be careful to not wade into territory of commercial wisdom of the CoC. While the lines between commercial wisdom of the CoC and legality of its decisions are clear in abstract, wherein only latter are subject to judicial review. However, overlaps between commercial and legal aspects can blur in certain situations. Respecting the distinction while facilitating transparency in CIRP is crucial.

Supervising Liquidation: Streamlining Process and Ensuring Continuity from CIRP

The IBC Act, 2026 amends Section 35(2), which now states that:

The committee of creditors shall supervise the conduct of the liquidation process by the liquidator under Chapter III in such manner as may be specified.

The CoC constituted during CIRP will thus now have an extended role in the liquidation process. The CoC will supervise conduct of the liquidator and guide it on all commercial matters. Broadly, the CoC’s role in liquidation is akin to its role vis-à-vis the resolution professional during CIRP but a direct comparison maybe pre-mature as various details about roles of both entities in liquidation are unknown. For now, to strengthen the CoC’s role in the liquidation process and its supervision of the liquidator two crucial changes are worth highlighting:

Firstly, Section 34(4) states that an insolvency resolution professional appointed as resolution professional for CIRP ‘shall not be appointed’ or replaced as the liquidator for liquidation process of the corporate debtor. Section 34, in its previous draft in the IBC (Amendment) Bill, 2025 envisaged that the resolution professional’s appointment as a liquidator shall not be automatic and needs to be approved by the CoC. However, Section 34(4) as finally amended by the IBC Act, 2026 disqualifies a resolution professional from being appointed as a liquidator altogether. The Select Committee Report suggests that various stakeholders had a valid concern that a resolution professional has a ‘perverse incentive’ to favor liquidation over resolution. Since the liquidator gets a percentage of liquidation estate as the liquidator fee. Thus, the Select Committee recommended amendment of Section 34 to state that a resolution professional will be disqualified from being appointed as a liquidator.

Secondly, Section 34A empowers the CoC to replace the liquidator by a vote of not less than sixty-six per cent of the voting share. The CoC must believe the liquidator appointed under Section 34 ‘is required to be replaced.’ The CoC need not provide any specific grounds for removal and replacement of the liquidator. It is unclear if the CoC’s decision to replace a liquidator can be challenged in the NCLT or not. Or will it be swept under the doctrine of commercial wisdom.

Nonetheless, Section 34(4) read with Section 34A ensures that liquidator will be someone who was not involved in CIRP of the corporate debtor. And the liquidator so appointed can be replaced by the CoC if it deems fit. The above changes are to ensure that the liquidator’s incentives are not improperly aligned to secure a higher remuneration. And since the liquidator will be a person not involved in CIRP, it will presumably provide the CoC immense scope and greater leverage to guide the liquidator. And, perhaps, retain the balance of power in its favor.

The IBC Act, 2026 simultaneously favors continuity and disjuncture in liquidation of the corporate debtor. It favors continuity by empowering the CoC to supervise liquidation, which will allow it to apply the learnings from CIRP to liquidation and hopefully maximize value of the corporate debtor’s assets in the entire process. The IBC Act, 2026 favors disjuncture by requiring that a liquidator shall not be a resolution professional involved in CIRP. And to maintain balance between continuity and disjuncture from CIRP, the IBC Act, 2026 has made some additional changes. For example, the IBC Act, 2026 amends Section 35(1)(a) to state that the liquidator shall maintain an updated list of creditors. While previously, the liquidator was required to ‘verify claims of all the creditors’ which would have involved the liquidator initiating the process of verifying claims; a process already undertaken and completed by the resolution professional during CIRP. As the Select Committee noted, this change:

… involves streamlining the claims process and formally extending the role of the Committee of Creditors (CoC) to supervise the liquidation. This streamlined approach is intended to avoid repetition of activities conducted during CIRP and expedite the liquidation process. (para 23.6)

Thus, amendments to provisions relating to liquidation are a mix of ensuring continuity and mandating the need for fresh personnel. But overall objective seems to be to streamline the entire process and ensure that liquidation and CIRP are not treated completely independent processes. And some work completed during CIRP can be utilized to expedite liquidation with the larger objective of maximizing the corporate debtor’s assets.

Some stakeholders expressed valid concerns to the Select Committee about the CoC’s powers vis-à-vis the liquidator and that there was uncertainty as to the role of each entity. While Chapter II – dealing with CIRP – delineates the powers and role of the resolution professional in detail especially which decisions require prior approval of the CoC and which can be undertaken by the resolution professional independently. A similar detailed statutory prescription for roles of the liquidator and the CoC is amiss in Chapter III relating to liquidation process despite amendments to Section 34 and insertion of Section 34A. The Select Committee has relied on the assurance of the Ministry of Corporate Affairs that concerns of the stakeholders about the CoC’s powers in relation to liquidator will be addressed, but details – for now – are sparse.

Finally, Section 33(2) has also been amended. A proviso has been added to provide statutory basis for the CoC’s powers to directly dissolve a corporate debtor without confirmation of a resolution plan. Previously, even though Section 33(2) did not expressly empower the CoC to directly dissolve the corporate debtor, the NCLT in the matter of Synew Steel Private Limited permitted the CoC to take such a decision. The NCLT’s rationale was that since all assets of the corporate debtor had been realized, liquidation will serve no useful purpose, and it is deemed to have been completed. The Proviso though states that the CoC’s decision to dissolve a corporate debtor will have to comply with specified conditions. Presumably, the intent is to include some safeguards to consider the corporate debtor’s interests, and the relevant conditions may be included in the CIRP Regulations. While dissolution typically follows liquidation as per Section 54. However, where there are no meaningful or recoverable assets, empowering the CoC to directly dissolve the corporate debtor is practical as it may prevent a cumbersome CIRP and liquidation process.

Notably, there is no other change in Section 33(2) wherein the CoC can directly decide to liquidate a corporate debtor before confirmation of a resolution plan. Implying that the CoC is not bound to record reasons for such a decision. While the CoC is – under the amended Section 30(4) – required to record reasons for approval of a resolution plan no similar obligation has been introduced in Section 33(2). This asymmetry is hard to understand. The Supreme Court in Elegna Co-op Housing case approved the NCLAT’s observations which had mandated the CoC to:

Any recommendation for liquidation by the Committee of Creditors shall be accompanied by a reasoned justification recorded in writing, evidencing proper application of mind and due consideration of all viable alternatives, in consonance with the objective of the Code.

While the directions were specific to facts of the case which involved stakes of real estate allottees, need for the CoC to record reasons for liquidation is hard to dispute. Under Section 33(2) where the CoC has been empowered to decide directly in favor of liquidation, recording reasons for it may go a long way in ensuring transparency. And for stakeholders to understand the reasons for not completing CIRP. In fact, a decision to liquidate is at odds with the IBC’s objectives which aims to rescue the corporate debtor. In such a scenario, recorded reasons should reflect as to why the IBC’s stated aims are being sacrificed in favor of liquidation.

The CoC’s power to directly liquidate a corporate debtor instead of completing CIRP is drastic as it may lead to death of the corporate debtor. And, yet the CoC need not provide reasons for such a decision. It is likely, that the CoC’s decision to liquidate a corporate debtor will be based – almost exclusively – on commercial considerations and will be outside the purview of judicial review. However, mandating the CoC to record its reasons would have been ideal and would have ensured parity in its role in CIRP as well as liquidation.

CoC – An Independent Entity with Immense Responsibility

NCLAT in CoC of Think and Learn Pvt Ltd v Riju Ravindran held that the CoC possesses legal character of a juristic person. And it can sue and be sued in its own name. NCLAT observed that while the financial creditors in the CoC have a common objective, they do not have an identical interest since each one of them pursues their interest as per the independent contract they signed with the corporate debtor. NCLAT defined the CoC’s role in following words:

Under the scheme of the IBC, the CoC is conceived as a statutory contrivance, an engine, that runs the entire insolvency resolution process. In another sense CoC is also required to be a statutory conscience keeper, as the responsibility it is enjoined with travels far beyond its preference to protect the financial interest of the members constituting it, since it is also required to secure the interest of every creditor of the corporate debtor besides the corporate debtor itself. (para 8.1) (emphasis added)

In upholding right of the CoC to litigate in its own name, NCLAT underlined that it was a statutory body assigned to take business decisions founded on ground realities which bind all stakeholders. The IBC Act, 2026 has further highlighted and enhanced centrality of the CoC’s role and wide-ranging impact of its business decisions. And the IBC Act, 2026, contemporaneously, has attempted to enhance transparency in the CoC’s decision-making by mandating it to provide reasons for its decision to approve a resolution plan. It may not be an overstatement to conclude that the CoC’s conduct, and decisions will determine the fate and trajectory of CIRP, and in some cases, a timely liquidation of the corporate debtor. An immense responsibility. Thus, once CIRP is triggered, the CoC will expedite or delay the corporate debtor’s journey to the grave, metaphorically or literally.

IBC (Amendment), 2026 Series – V | Ghost of the Rainbow Paper Case: The Parliament Buries an Unnatural Interpretation

April 27, 2026 by Rav Singh

Introduction

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) – inter alia – amends Section 53 of the Insolvency and Bankruptcy Code, 2016 (‘IBC’). The amendment is, largely, in response to the Supreme Court’s decision in State Tax Officer v Rainbow Papers Limited (‘Rainbow Papers case’). The Supreme Court in the Rainbow Papers case held that government or a governmental authority could be considered a secured creditor under the IBC. Immediate effect of the Rainbow Papers case was that the government could claim a higher rank as a secured creditor under Section 53(1)(b)(ii) instead of claiming amounts alongside unsecured creditors under Section 53(1)(e). The Rainbow Papers case detracted from the legislative intent to place government at par with unsecured creditors.

The legal position got further entangled when subsequently in Paschimanchal Vidyut Vitran Nigam Ltd v Raman Ispat Private Limited & Ors (‘Raman Ispat case’) the Supreme Court confined decision in the Rainbow Papers case to facts of that case alone. And, also commented that the Supreme Court in the Rainbow Papers case did not adequately examine Section 53 and the waterfall mechanism. This was followed by a review petition where the Supreme Court refused to consider its observations in the Rainbow Papers case. And instead took exception to comments made in the Raman Ispat case. The Supreme Court questioned propriety of a co-ordinate bench commenting on judgment of another bench instead of referring the case to a larger bench and observed:

If a Bench does not accept as correct the decision on a question of law of another Bench of equal strength, the only proper course to adopt would be to refer the matter to the larger Bench, for authoritative decision, otherwise the law would be thrown into the state of uncertainty by reason of conflicting decisions. (para 20)

Unsurprisingly, the law was ‘thrown’ into uncertainty after the above set of events.

The Rainbow Papers case, the Raman Ispat case, and the Supreme Court’s observations in the review petitions meant that position of government as secured creditor was both valid and under scrutiny. And certainty was an enemy. The Rainbow Papers case could be relied on as a binding precedent or plausibly be confined only to facts of the particular case depending on proclivities of the stakeholders involved. It is to rectify this unwelcome legal position that the IBC Act, 2026 inserted an Explanation to Section 53(1)(e) to clarify that amounts due to the Central Government and the State Government shall be distributed under that sub-clause. Thereby, placing the government at par with unsecured creditors and undoing ratio of the Rainbow Papers case. However, I conclude that the amendment to Section 53 may not completely eliminate effect of the Rainbow Papers case. I suggest that one of the Supreme Court’s observations in the Rainbow Papers case: tax claims should be necessarily part of the resolution plan, still survives the IBC Act, 2026.

In this article, I provide a descriptive context and background that necessitated the amendment to Section 53 effectuated by the IBC Act, 2026. I begin by elaborating on the rationale that underpinned the Rainbow Papers case, the discomforts it caused, and limits of the amendment made to Section 53 by the IBC Act, 2026.

The Rainbow Papers Case and its Aftermath

In the Rainbow Papers case, the Supreme Court had to answer the question that whether Section 53 of the IBC overrides Section 48 of the Gujarat Value Added Tax Act, 2003 (‘GVAT Act, 2003’). The latter stated that:

48. Tax to be first charge on property.—

Notwithstanding anything to the contrary contained in any law for the time being in force, any amount payable by a dealer or any other person on account of tax, interest or penalty for which he is liable to pay to the Government shall be a first charge on the property of such dealer, or as the case maybe, such person.

Similarly, Section 53 of the IBC begins with a non-obstante clause and provides for distribution of assets ‘Notwithstanding anything to the contrary contained in any law …’.

To begin with, the Supreme Court condoned delay by the tax department in filing its claim by reasoning that timelines under the IBC are directory. And even if the claim was not filed before the deadline announced by the resolution professional, it was incumbent on the resolution professional to revise the admitted claims once he came across additional information – relating to outstanding tax claims – warranting such revision.

The second issue was about the States’ status as a secured creditor. The State’s argument was that definition of secured creditor under Section 3(30) read with definition of security interest under Section 3(31) was wide enough to include a statutory charge such as under Section 48 of the GVAT Act, 2003. The Supreme Court accepted the State’s argument and held that the latter was not contrary to the IBC and:

Section 3(30) of the IBC defines secured creditor to mean a creditor in favour of whom security interest is credited. Such security interest could be created by operation of law. The definition of secured creditor in the IBC does not exclude any Government or Governmental Authority. (para 57)

And thus, the Supreme Court concluded that debts owed to the State under the GVAT Act, 2003 were to rank equally with other debts owed to a secured creditor under Section 53(1)(b)(ii). The Supreme Court’s conclusion was based on the definition of security under Section 3(31) which does not exclude a statutory charge as well as the definition of secured creditor which does not exclude the State. The Supreme Court was also influenced by the fact that the impugned resolution plan completely ignored tax dues owed by the corporate debtor to the State and it questioned the validity of a resolution plan that did not incorporate tax dues.

In some of the subsequent decisions, the Rainbow Papers case was sought to be limited to its facts. For example, in Department of State Tax v Ashish Chhawchharia Resolution Professional for Jet Airways (India) Ltd & Anr (October 2022), the National Company Law Appellate Tribunal (‘NCLAT) had to engage with the question if Department of State Tax was a secured creditor. The NCLAT examined Section 82 of the Maharashtra GST Act, 2017 which provided that the tax payable shall be first charge on the property of taxpayer, except as provided in the IBC. Thus, in view of the specific exception wherein the IBC triumphed the Maharashtra GST Act, 2017 the NCLAT found the Rainbow Papers case to be inapplicable in the impugned case.

The most notable example of limiting effect of the Rainbow Papers case only to facts of that case was in the Raman Ispat case. In this case, Paschimanchal Vidyut Vitran Nigam Limited (‘PVVNL’) relied on non-obstante clause in the Electricity Act, 2003, relevant clauses of agreement entered to between PVVNL and the corporate debtor, and the Rainbow Papers case to claim priority in liquidation proceedings. PVVNL claimed that it was a statutory corporation and dues owed to it amounted to dues owed to the State. The Supreme Court disallowed its claim and also expressed its disagreement with the Rainbow Papers case by observing that:

The careful design of Section 53 locates amounts payable to secured creditors and workmen at the second place, after the costs and expenses of the liquidator payable during the liquidation proceedings. However, the dues payable to the government are placed much below those of secured creditors and even unsecured and operational creditors. (para 49)

The Supreme Court in the Raman Ispat case further held that observations in the Rainbow Paper case must be confined to facts of that case. Thus, creating an uncertain legal position wherein two benches of the Supreme Court – of equal strength – took diametrically opposite positions in so far priority to be accorded to government dues under Section 53. In the absence of a reference to a larger bench, the only plausible way of reconciling the two judgments was to deduce that the Rainbow Papers case was be applicable only in cases where provisions like Section 48, GVAT Act, 2003 were applicable. While in other cases the Raman Ispat case had a more persuasive value. Irrespective of this reconciliation, the legal situation was far from satisfactory.

Limitations of the Rainbow Papers Case

The dissatisfactory legal situation was rooted in the Supreme Court’s reasoning in the Rainbow Papers case which suffered from a few obvious limitations. To begin with, one can argue that since Section 53(1)(e) was a separate category for the amounts due to the Central Government and the State Government, the legislative intent was straightforward: all dues owed to the government were to be classified in that category. And while the definition of security interest and secured creditor did not explicitly exclude the government, reliance on definitions was not conclusive that the government can be a secured creditor. The relevant definitions should have ideally been read with Section 53, which would have pointed towards the government not being a secured creditor. A harmonious interpretation of the relevant statutory definitions with the design of waterfall mechanism under Section 53 was missing from the Rainbow Papers case.

Another aspect that the Supreme Court overlooked in the Rainbow Papers case was the distinction between a voluntary charge and a statutory charge. Generally, a secured creditor acquires its status because of a voluntary commercial transaction with the corporate debtor. However, the government – especially in the Rainbow Papers case – was claiming status of a secured creditor based on a statutory provision. Equating the government to a secured creditor based on a statutory provision removes element of voluntariness of the corporate debtor and provides the government an easy way to claim status of a secured creditor by adopting similar provisions in existing and future laws. Equating an involuntary charge on property with a charge created by voluntary transaction –disrupted one of the IBC’s aims. The aim, in this context, was to give priority to private secured creditors who undertook the risk of lending capital to the corporate debtor. The waterfall mechanism under Section 53 recognizes the risk undertaken to incentivize similar transactions in the future and help development of the credit market.

Also, another one of the IBC’s aims, as mentioned in the Preamble is to alter ‘priority of payment of Government dues.’ The lowering of priority of the government’s dues is justifiable on various counts with the primary one being that the government has other avenues to recover money including levy of taxes from financial robust corporates among other taxpayers. Relevance of the IBC’s aim of lowering ranking of the government dues was missing in the Rainbow Papers judgment. And a purposive interpretation of Section 53 would have led the Supreme Court to the conclusion that the government cannot rank high as a secured creditor under Section 53(1)(b)(ii) but should remain confined to Section 53(1)(e) as an unsecured creditor.

Overall, the Rainbow Papers had weak legs to stand on. The Supreme Court by focusing only on the definition of security interest and secured creditor did not do ample justice to other relevant provisions of the IBC. And, resultantly upset important aims of the IBC, created disharmony amongst the various provisions including between the various categories enumerated for waterfall mechanism under Section 53.

The IBC Act, 2026 Amends Section 53

To rectify the above legal position, the IBC Act, 2026 inserts an Explanation to Section 53(1)(e)(i) which states that:

For the removal of doubts, it is hereby clarified that any amount, whether or not a security interest is created to secure such amount by an act of two or more parties or merely by operation of law, due to the Central Government and the State Government, in respect of the whole or any part of the period of two years preceding the liquidation commencement date, shall be distributed under this sub-clause and any remaining amount, whether or not such security interest is created to secure the amount, due to the Central Government and the State Government, shall be distributed under clause (f);”; (emphasis added)

The Explanation intends to clarify that a security interest created through a voluntary contractual arrangement or by a statutory provision stands on the same footing in so far as the government is concerned. Irrespective of the mode, dues to the Central Government and the State Government are to be paid under Section 53(1)(e)(i) or Section 53(f). But, not under Section 53(1)(b)(ii) as interpreted in the Rainbow Papers case.

The Rainbow Papers case unleased a flurry of opinions if the ‘crown debt’ should be given priority over private creditors. There are circumstances where the government’s claims can be accorded priority, but my view is that it should flow from the statutory provisions and not judicial innovation. Amendment via the IBC Act, 2026 clearly re-establishes that the Parliament does not wish to accord priority to the government’s claims. The IBC Act, 2026 clarifies that even if relevant statutory provisions provide that the government shall have first charge and thereby status of a secured creditor vis-à-vis unpaid debts, the ranking of Section 53 shall determine the order of payment. And not any other relevant statutory provision. Thus, irrespective if the provision of tax law or otherwise results in the government being a secured operational creditor, it cannot be placed alongside other private secured creditors under Section 53(1)(b)(ii). The government’s dues are to be paid under Section 53(1)(e).

Sliver of the Rainbow Papers Case May Survive

If we confine ourselves to one aspect of the Rainbow Papers case discussed above, then the Explanation added by the IBC Act, 2026 undoubtedly negates its ratio. However, in the Rainbow Papers case, the Supreme Court also made another crucial observation: legality of an approved resolution plan. The Supreme Court observed that the NCLT should not approve a resolution plan under Section 31(2) that did not conform to requirements mentioned in Section 31(1). And, concluded that:

If the Resolution Plan ignores the statutory demands payable to any State Government or a legal authority, altogether, the Adjudicating Authority is bound to reject the Resolution Plan. (para 52)

The Supreme Court clarified that under Section 31 onus is on the NCLT to examine if a resolution plan meets the requirements enlisted in Section 30(2). The relevant parameter under Section 30(2)(b) – in respect of government’s dues – is that a resolution plan must provide for payment of debts of operational creditors. However, if an operational creditor fails to submit their claim to the resolution professional, it stands to reason that their claim is extinguished on approval of the resolution plan. However, implication of the Supreme Court’s above observations in the Rainbow Papers case, in my view, is that unless statutory demands such as tax dues are necessarily incorporated in the resolution plan the NCLT must decline to approve it. Irrespective of whether such claims were submitted within the deadline to the resolution professional. However, amendments to Section 30 and Section 53 via the IBC Act, 2026 do not address this aspect of the Rainbow Papers case. However, one could argue that the contemporaneous amendments made to Section 31 – to underline scope of the clean slate doctrine – do negate the above observation. But, given the history of uncertainty about scope of the clean slate doctrine, one can never be sure. In my view, amendment to Section 53 read with amendment to Section 31 do effectively dilute the above observation made in the Rainbow Papers case. But, there is still possibility of a sliver of ratio to survive by making a case that a resolution plan that does not contain pending tax claims cannot be legally approved by the NCLT under Section 31.

To conclude, amendments to the IBC via the IBC Act, 2026 convincingly negate ratio of the Rainbow Papers case in so far as it relates to the interpretation of waterfall mechanism under Section 53. And ensures that the government claims it tax dues only under Section 53(1)(e)(i). It is a welcome amendment and ensures that the chaos and uncertainty unleased by the Rainbow Papers case is tamed. However, a statutory amendment is always subject to another judicial ‘innovation’ that frequently erupts in the IBC landscape. Though the scope for such an innovation has been sufficiently narrowed by the IBC Act, 2026.

IBC (Amendment), 2026 Series – IV | The Clean Slate Doctrine: Another Attempt at Laying Down the Law

April 24, 2026 by Rav Singh

The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (‘IBC Act, 2026’) – inter alia – amends the Insolvency and Bankruptcy Code, 2016 (‘IBC’) to underline scope of the clean slate doctrine. IBC Act, 2026 is the second attempt to amend Section 31 of the IBC and ensure that once the National Company Law Tribunal (‘NCLT’) approves the resolution plan, it is final and binding on all stakeholders including all statutory authorities. The clean slate doctrine, as encoded in Section 31 has various aims; the primary one is to provide certainty to the successful resolution applicant that all claims not part of the approved resolution plan are extinguished. And the successful resolution applicant can take over and run the corporate debtor without the worry of discharging extraneous liabilities. However, various creditors – including statutory authorities – frequently file claims arguing that they are not bound by the approved resolution plan. The statutory authorities rely on various arguments: they weren’t issued proper notices by the resolution professional, certain claims such as taxes remain unaffected by Corporate Insolvency Resolution Process (‘CIRP’) of the IBC or that they are not bound by the resolution plan since they weren’t part of CIRP. And these arguments have led to mixed results undermining lofty aims of the clean slate doctrine.

Section 31 originally stated that a resolution plan was binding on guarantors and all stakeholders. Ideally, the latter term – ‘all stakeholders’ – should have sufficed to bind the statutory authorities. However, persistent claims filed by statutory authorities even after approval of the resolution plan prevented the clean slate doctrine from providing complete certainty to the successful resolution applicant. Thus, in 2019, Section 31 was amended to expressly state that an approved resolution plan was binding on the Central Government, State Government or a local authority to whom statutory dues are owed by the corporate debtor. However, it proved insufficient and the IBC Act, 2026 further amends Section 31 on similar lines to clarify the effect of an approved resolution plan and scope of the clean slate doctrine.

This article provides a descriptive account of the jurisprudence that has emerged under Section 31, conceptual clarity that the courts have tried to introduce, and the pockets of uncertainty that survived the amendment to Section 31 made in 2019. Specifically, uncertainty about claims under tax laws and pending arbitration proceedings. This article thereafter elaborates on the additions made to Section 31 via the IBC Act, 2026 and claims that while the amendment introduces additional clarity and further demarcates scope of the clean slate doctrine, some pending issues may only be resolved through judicial interpretation. Specifically, issues relating to tax dues owed by the corporate debtor and unjust enrichment.

I. Preventing a Hydra Head from Popping Up

In CoC of Essar Steel India Ltd v Satish Kumar Gupta & Ors (‘Essar Steel case’), the Supreme Court inter alia addressed challenge to the approved resolution plan by erstwhile promoters who were personal guarantors of loans to the corporate debtor. The resolution plan – as approved by the NCLT – extinguished the right of subrogation of guarantors in respect of guarantees that had been invoked by financial creditors. The guarantors challenged the said clause and argued that since they were not part of the resolution plan submitted by the successful resolution applicant – ArcelorMittal – they cannot be bound by its terms. And that their right to subrogation survives irrespective of the terms of resolution plan. The Supreme Court cited State Bank of India v V. Ramakrishnan (‘SBI case’), to dismiss the promoters claim. The SBI case was a judgment in the context of moratorium in which the Supreme Court held that under Section 31, a resolution plan also binds the guarantors of corporate debtors.

The Supreme Court relied on observations in the SBI case to set aside observations of the National Company Law Appellate Tribunal (‘NCLAT’). The NCLAT had observed that claims against corporate debtor that remained undecided, can be decided by appropriate forums even after approval of the resolution plan. The Supreme Court disagreed with the NCLAT’s directions and held that:

A successful resolution applicant cannot suddenly be faced with “undecided” claims after the resolution plan submitted by him has been accepted as this would amount to a hydra head popping up which would throw into uncertainty amounts payable by a prospective resolution applicant who successfully take over the business of the corporate debtor. (para 67) (emphasis added)

The Supreme Court, underlining the importance of certainty and finality of CIRP directed that all claims against the corporate debtor must be submitted to and decided by the resolution professional. Thus, a successful resolution applicant, at the time of approval of the resolution plan, can discharge outstanding liabilities of the corporate debtor and start on a ‘clean slate’. The Supreme Court’s observations were accurate not only in respect of the IBC’s aims but also correctly clarified the import of Section 31. As per Section 31, once the NCLT approves a resolution plan it was binding on the corporate debtor and its employees, members, creditors, ‘guarantors and other stakeholders involved in the resolution plan.’

II. Ghanashyam Mishra Case Underlines Effect of Section 31 vis-à-vis the State

The above-mentioned ratio of the Essar Steel case should have, ideally, sufficed to clarify legal effect of approval of a resolution plan vis-à-vis the State, including all statutory authorities. As the statutory authorities could reasonably be termed a ‘stakeholder’ in the resolution plan, even if they were not expressly mentioned in Section 31. However, the IBC was amended in 2019, to expressly clarify that the resolution plan was binding on various authorities of the State. In 2019, the following phrase was added in Section 31:

… including the Central Government, any State Government or any local authority to whom a debt in respect of the payment of dues arising under any law for the time being in force, such as authorities to whom statutory dues are owed …

Statement of Reasons and Objects of the IBC (Amendment) Bill, 2019 mentioned that tax authorities were also bound by a resolution plan approved by the NCLT. Implying that the tax and other statutory authorities were refusing to accept that statutory dues – for example, outstanding tax payments – were also extinguished or altered as per terms of the resolution plan. The Supreme Court in Ghanashyam Mishra & Sons v Edelweiss Asset Reconstruction Co Ltd (Ghanashyam Mishra case) reiterated the import and rationale of Section 31 and the effect of the amendment made to Section 31 in 2019. Two questions that the Supreme Court had to answer in the Ghanashyam Mishra case were: (i) whether the Central Govt, State Govt or local authority were bound by the resolution plan approved by the NCLT under Section 31?; (ii) whether the Central Govt, State Govt or local authority can initiate proceedings against the corporate debtor in respect of dues not part of the resolution plan approved by the NCLT under Section 31? The Supreme Court answered first question in the affirmative and second question in the negative.

The Supreme Court elaborated on the various steps in CIRP to underline that a resolution professional prepares an information memorandum to inform the resolution applicants about financials of the corporate debtor. The intent is that the resolution applicants submit resolution plans to satisfy the enlisted financial liabilities and ensure effective running of the corporate debtor. The Supreme Court’s three observations are pertinent: (a) dues arising under any law for the time being in force and payable to the Central Govt, State Govt, or local authority are operational debts, and any entity to whom a statutory dues are owed will be covered by the term ‘creditor’ under Section 31; (b) in the alternative, the Central Govt, State Govt or local authority will be covered by the phrase ‘other stakeholders’ under Section 31; (c) and this observation flowed from the first and second observation: the amendment of 2019 was only clarificatory in nature. The amendment of 2019 to Section 31 only made express what was already implied, i.e., the State and its various statutory authorities were also bound by the resolution plan once it is approved by the NCLT.

The repeated resistance of statutory authorities such as the Revenue Department to be bound by terms of the resolution plan can – in my view – be attributed to two reasons. Firstly, oversight in submitting the outstanding claims/dues against the corporate debtor during CIRP. Secondly, an erroneous view that the statutory authorities are a distinct and standalone category. Both were understandable in initial few years of the IBC because comprehension about the scope and effect of CIRP was in a nascent stage. But, a continuing insistence, especially by the Revenue Department that outstanding tax dues cannot be reduced or extinguished by resolution plan approved under CIRP even after a decade of the IBC – and several judicial decisions – is inexcusable.

However, the Essar Steel case and the Ghanashyam Mishra case cumulatively ensured that scope of the clean slate doctrine, interpretation of Section 31, the effect of amendment in 2019 were all clearly established. And these decisions reduced scope for arguments by statutory authorities that they weren’t bound by the resolution plan.

III. Further Clarifications (and Confusions)

The Supreme Court’s pronouncement in the Essar Steel case, the Ghanashyam Mishra case, as well as the SBI case – while reduced the scope for statutory authorities to pursue their claims after approval of a resolution plan – were not sufficient to clarify binding nature of an approved resolution plan. Lending finality to the resolution plan proved to be a recurrent difficulty. For example, in Electrosteel Limited v Ispat Carrier Private Limited, the Supreme Court had to clarify that an approved resolution plan extinguishes all previous claims including arbitration proceedings. And an arbitral award passed in respect of pre-CIRP claims but after approval of the resolution plan is null. However, in Ujaas Energy Ltd v West Bengal Power Development Corporation Ltd, the Supreme Court provided a limited relief in respect of pre-CIRP arbitration proceedings against the corporate debtor. The West Bengal Power Development Corporation had filed a counterclaim in respect of arbitration proceedings against the corporate debtor. Subsequently, CIRP was initiated against the corporate debtor. The Supreme Court observed that the resolution plan did not expressly reflect exclusion of the counterclaim and the resolution professional despite being aware of it did not take it into consideration while formulating the resolution plan. Based on facts of the case, the Supreme Court held that while the West Bengal Power Development Corporation cannot pursue its counterclaim as it stands extinguished, it can raise the plea of set-off by way of a defence. While the Supreme Court provided a limited relief based on facts of the case, the Ujaas Energy case exemplified that scope of the clean slate doctrine may require suitable tailoring in some fact situations. And complete clarity may not emerge from statutory provisions alone.

A crucial site of inconsistency has been tax assessments of the corporate debtor. The Madras High Court in Dishnet Wireless Ltd v Assistant Commission of Income Tax (OSD) (‘Dishnet Wireless case’) observed that proceedings under Section 148, Income Tax Act, 1961 were pending before commencement of CIRP. But appropriate concessions from the Income Tax Department were not included in the final resolution plan. Nor was any notice issued to the Income Tax Department. The Madras High Court held that it was incumbent on the corporate debtor to serve proper notice to the Income Tax Department about CIRP. And thus, permitted continuation of the assessment proceedings even after approval of the resolution plan. But the Delhi High Court in M Tech Developers Pvt Ltd v National Faceless Assessment, Delhi & Anr (‘M Tech Developers case’) in the context of faceless assessment proceedings under Section 144B, Income Tax Act, 1961 held that:

Any effort to assess, reassess or re-compute could tend to lean towards a re-computation of liabilities which otherwise stands freezed by virtue of the Resolution Plan having been approved. (para 8)

The Delhi High Court expressed its disagreement with the Madras High Court’s view expressed in the Dishnet Wireless case. The Delhi High Court in a few other cases, has taken a view that aligns with the M Tech Developers case, but overall the decisions are inconsistent. Militating against certainty that the clean slate doctrine intends to provide to resolution applicants under Section 31.

Further, in Tata Steel Limited v State of UP, the Allahabad High Court disallowed assessment proceedings after approval of the resolution plan by relying on the Ghanashyam Mishra case. In appeal, the Supreme Court did not disagree with the Allahabad High Court but left open the issue of unjust enrichment. The issue of unjust enrichment, in this context, involves a determination if the tax collected/deducted by the corporate debtor can be made part of the resolution plan. Or will it have to be necessarily remitted to the Revenue Department. This question is pertinent for any indirect taxes collected or any tax deducted at source under the Income Tax Act, 2025 by the corporate debtor. If resolution plan is approved by the NCLT can such taxes collected by the corporate debtor – yet to be remitted to the State – be made part of the resolution plan? Or do they have to be necessarily set aside. The courts have not pronounced the final word on this issue, but my tentative view is that permitting taxes so collected to be part of the resolution plan may lead to unjust enrichment. And it may be advisable to keep such taxes outside the purview of resolution plan.

IV. IBC Act, 2026 Lays Down the Law – Again

The IBC Act, 2026 – partially in recognition of the some of the confusions that survived the 2019 amendment to Section 31 – attempts to again ring fence the approved resolution plan and place a statutory stamp on its finality. Section 31(6) – inserted via the IBC Act, 2026 – is worth extracting:

(6) Where the Adjudicating Authority approves the resolution plan under sub-section (1),––

(a) unless otherwise provided in the resolution plan, any claim, against the corporate debtor and its assets under any other law for the time being in force, prior to the date of approval, shall be extinguished; and

(b) no proceedings shall be continued or instituted against the corporate debtor or its assets on the basis of such claims, including proceedings for assessment of the claims.

The IBC Act, 2026 also inserts three Explanations to the above sub-section. Explanation 1 and Explanation 2 inserted further clarify that proceedings against promoters or a person in control or management shall be unaffected. Further, if a person had joint liability for payment of debt and such a person makes a payment after approval of the resolution plan then right to be indemnified of that person shall be extinguished.

In view of the above, three additions to the clean slate doctrine – via the IBC Act, 2026 – are:

(a) to prevent continuation or initiation of assessment proceedings against the corporate debtor after approval of the resolution plan. This restraint is evidently directed at restraining tax authorities. A plain interpretation suggests that the Delhi High Court’s view in M Tech Developers case has been endorsed. Whether the amendment is sufficient to deter the tax authorities, or a further nuance will be added by judicial interpretation remains to be seen.

(b) a distinction is made between proceedings against promoters or persons in management or control of the corporate debtor and the corporate debtor itself. It is clarified that the clean slate doctrine is only applicable to claims against the corporate debtor and not to persons who managed or controlled the corporate debtor. This again underlines that the corporate debtor’s liabilities are frozen as per the resolution plan. And even the guarantor’s right of indemnification does not survive approval of the resolution plan.

(c) in part to resolve the controversy that emerged in the Essar Steel case, prevents the guarantor or any person who has a joint liability to repay the corporate debtor’s debts to seek indemnification.

In summation, one can make a persuasive case that the amendments to Section 31 in 2019 and 2026 – alongside various judicial precedents cited above – are enough to provide certainty and finality to a resolution plan. And claims not included in the resolution plan are extinguished once it is approved by the NCLT. An overwhelming no. of issues have been addressed by both the amendments of 2019 and 2026, but only tenacity of the tax authorities and complexity of fact situations will provide an answer if the IBC Act, 2026 has succeeded in clarifying scope of the clean slate doctrine.

V. A Hopeful Future

Section 31 – based on the amendments in 2019 and by the IBC Act, 2026 – provide an insight about the challenge of drafting provisions for the IBC. Until Section 31 was amended to clearly and expressly state that the statutory authorities were bound by the resolution plan, they refused to extinguish their claims against the corporate debtor. The first evidence of this was in 2019, wherein a specific phrase mentioning Central Govt, State Govt and local authorities had to be inserted in Section 31 to clarify that a resolution plan also binds statutory authorities. This was even though the terms ‘creditors’ and ‘other stakeholders’ clearly swept various statutory authorities under their scope and made them bound by the resolution plan. Amendments introduced by the IBC Act, 2026 are a further step in that direction: making express something that was implied in Section 31. For example, preventing the continuation or initiation of assessment proceedings against the corporate debtor. A restraint that should have been evident even after the amendment in 2019 but had to be spelled out expressly. Thus, if something has been implied, or has required judicial interpretation in Section 31, it has not had the desired effect. Legislative interventions have required scope of the clean slate doctrine to be spelled out expressly.

The IBC Act, 2026 incorporates this lesson and attempts to provide finality to the resolution plan and spells out scope of the clean slate doctrine in express terms. Hopefully, this legislative intervention should provide sufficient deterrence to the statutory authorities to resist binding nature of an approved resolution plan. And get their pending claims incorporated in the resolution plan itself, in a timely and appropriate fashion. Respect for finality and binding nature of the resolution plan will go a long way in serving and achieving the IBC’s objectives.