Vinodh Prasad
Thursday, 19 February 2026
The Supreme Court of India has delivered a pivotal judgment on default dates in corporate insolvency cases, particularly concerning the COVID-19 pandemic. In its recent decision, the Court declared that the protections under Section 10A of the Insolvency and Bankruptcy Code (IBC) do not apply to defaults occurring before March 25, 2020. This ruling carries significant consequences for corporate debtors and financial institutions involved in insolvency proceedings.
The Supreme Court reviewed an appeal against a National Company Law Tribunal (NCLT) order that admitted a Section 7 application against Hiranmaye Energy Ltd. filed by REC Ltd. The NCLT's decision, dated January 2, 2024, initiated the Corporate Insolvency Resolution Process (CIRP) based on defaults from March 31, 2018. The National Company Law Appellate Tribunal (NCLAT) upheld this order on January 25, 2024.
Central to the Court's ruling was the interpretation of Section 10A, which provides temporary relief during the pandemic. The Court clarified that a failed restructuring attempt does not alter a default date established before the pandemic. Power Trust, Hiranmaye Energy's promoter, contended that a restructuring proposal from February 21, 2020, modified the repayment schedule, thus qualifying for COVID-19 protections. However, the Court concluded that the restructuring was ineffective as the debtor did not fulfill preconditions.
Justice N.V. Ramana, presiding over the bench, stressed the importance of maintaining the original loan agreement's integrity. "A default date cannot be adjusted due to unsuccessful restructuring attempts. This ensures clarity and predictability within the insolvency framework," he asserted. The Court's decision reinforces the principle that the IBC is a comprehensive code with built-in remedies, leaving little room for reinterpretation of past defaults.
This ruling impacts stakeholders across the financial sector, especially banks and non-banking financial companies (NBFCs) managing distressed assets. Legal practitioners must now meticulously assess the timing of defaults and any restructuring efforts, as the ruling highlights the necessity of adhering to original loan agreements. Non-compliance could lead to litigation risks and potential penalties.
As the legal landscape evolves, insolvency and bankruptcy law practitioners must remain alert. The Supreme Court's interpretation of Section 10A will likely influence future cases and restructuring strategies. Given the ongoing complexities of corporate insolvency, stakeholders should brace for potential challenges in light of this ruling, which emphasizes the need for strategic legal compliance.
What You Need to Know
Supreme Court affirms Section 10A of IBC doesn't protect defaults predating March 25, 2020, even with later restructuring attempts.
Impacts corporate debtors, financial institutions (banks, NBFCs), and resolution professionals involved in pre-pandemic insolvency proceedings.
Reinforces IBC's emphasis on original loan agreements; unsuccessful restructuring doesn't alter established default dates for Section 10A applicability.
Assess default dates meticulously; ensure restructuring efforts meet preconditions to avoid litigation and ensure IBC compliance for pre-pandemic defaults.
Supreme Court clarifies Section 10A of IBC, ruling pre-COVID defaults remain unchanged despite failed restructuring.
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