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Insolvency and Bankruptcy: No indirectly backtrack or demand fresh modifications from approved resolution plans

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In Sanjay Dave v. Andhra Bank Ltd. & Ors. (Civil Appeal Nos. 12264-12266 of 2024, decided on May 27, 2026), the Supreme Court of India adjudicated a critical corporate insolvency dispute concerning the finality of Committee of Creditors (CoC) approved resolution plans and the boundaries of a Successful Resolution Applicant’s (SRA) liability under the Insolvency and Bankruptcy Code, 2016 (IBC). The appeal was preferred by Sanjay Dave—the Promoter/Director of the Micro, Small, and Medium Enterprise (MSME) Corporate Debtor, M/s. Oracle Home Textiles Limited—against an order of the National Company Law Appellate Tribunal (NCLAT) which had upheld a liquidation order and the forfeiture of his Rs. 1 crore Earnest Money Deposit (EMD).

The Supreme Court dismissed the appeals, affirming that once a resolution plan is approved by the CoC, the SRA cannot indirectly backtrack or demand fresh modifications by label-shaming transaction documents like Letters of Intent (LoIs) as “conditional”. Invoking the doctrines of estoppel and approbate and reprobate, the Apex Court ruled that structural risks—such as ongoing third-party litigation or staff salary liabilities—had been explicitly accepted by the appellant during CoC meetings. Consequently, his failure to submit a performance guarantee amounted to a calculated attempt to renege from the plan, justifying the absolute forfeiture of the EMD and reinforcing the unassailable primacy of the CoC’s commercial wisdom to force mandatory liquidation.

1. Factual Matrix & Procedural History

  • The Resolution Baseline: The Corporate Insolvency Resolution Process (CIRP) against M/s. Oracle Home Textiles Limited was admitted on August 9, 2018. The appellant, a Promoter/Director of the MSME Corporate Debtor, submitted a Resolution Plan pursuant to an explicit window allowed under the Code. On May 10, 2021, the appellant was notified that his final plan had been approved by the CoC with an overwhelming 99.90% voting majority.
  • The Friction over LoIs: On May 23, 2021, the Resolution Professional (RP) issued a Letter of Intent (LoIs). The appellant vehemently objected to specific clauses in this and subsequent LoIs, characterizing them as “conditional”:
    1. The Prospective Applicants Clause: The LoI stipulated that the plan’s approval was subject to orders reserved by the NCLT regarding pending applications filed by third-party Prospective Resolution Applicants (PRAs).
    2. The Labor Risk Clause: The LoI incorporated a provision shifting all past and operational financial risks/costs stemming from court cases filed by staff, employees, or workers exclusively onto the SRA.
  • Forfeiture and Deadlock: Because the appellant refused to sign the LoIs and failed to deposit a Performance Bank Guarantee (PBG), the RP issued consecutive revised LoIs. Upon final non-compliance with the third LoI, the RP officially forfeited the appellant’s EMD of Rs. 1,00,00,000/- (Rupees One Crore) on August 2, 2021.
  • The Shift to Liquidation: As the CIRP statutory timeline expired on February 21, 2023, without a viable implemented plan, the CoC voted in its 33rd meeting with a 99.61% majority to push the Corporate Debtor into liquidation. The NCLT dismissed the appellant’s applications against the forfeiture/LoI clauses and allowed the liquidation, a decision subsequently upheld in its entirety by the NCLAT on October 29, 2024.

2. Legal Issues & Institutional Determinations

A. The Illusion of Conditional Letters of Intent (Issue I)

The appellant argued that forcing an SRA to accept a plan contingent upon third-party litigation outcomes or open-ended legal hazards made the transaction legally conditional. The Supreme Court flatly rejected this premise:

  • The Primacy of Judicial Decrees: Justice K.V. Viswanathan observed that stating an LoI is subject to a judicial body’s final order is merely a reflection of the rule of law. Even if left unwritten, any final plan remains structurally subservient to prevailing judicial determinations unless overturned by a superior appellate forum.
  • Prior Knowledge: Corporate records and CoC minutes established that the appellant was physically present during meetings where the PRAs’ claims were debated. He could not pretend to be taken by surprise to escape a binding business commitment.

B. The Doctrine of Approbate and Reprobate (Issue II)

The Court deeply evaluated the appellant’s conduct across successive CoC assemblies:

  • Explicit Acquiescence: Relying on State Bank of India v. M.J. James (2022), the Court defined acquiescence as a direct or silent assent where a party stands by and confirms an arrangement, thereby abandoning alternate equitable choices.
  • Blowing Hot and Cold Prohibited: Regarding the shifting of staff and worker liability risks, the minutes of the 27th CoC meeting clearly recorded that the bank representatives explicitly informed the appellant that labor cost variations were his calculated risk, and the appellant had recorded his unambiguous agreement to the same. Under Nagubai Ammal v. B. Shama Rao (1956) and RIICO v. Diamond & Gem Development Corp. (2013), a commercial entity cannot accept the beneficial components of an approved transaction and subsequently attempt to dismantle its binding parts to extract separate advantages.

C. Absolute Irrevocability of CoC-Approved Plans (Issue III)

The Court used this dispute to re-emphasize the foundational boundaries laid down in Ebix Singapore Pvt. Ltd. v. CoC of Educomp Solutions Ltd. (2022):

  • No Post-Approval Retractions: Once the CoC exercises its commercial wisdom and approves a resolution plan, the SRA is completely precluded from raising subsequent observations or pushing for modified terms. The submission of a plan signals that the resolution applicant has thoroughly analyzed structural data and market vulnerabilities.
  • Protection of Timelines: Allowing an applicant to renegotiate or orchestrate an exit based on tactical clauses would introduce an unregulated tier of negotiations, destroying asset values and stultifying the strict statutory outer limit of 330 days mandated under Section 12(3) of the IBC. The Court labeled the appellant’s objections a clear “subterfuge” and a clever ploy designed to bypass the absolute ban on direct plan withdrawals.

D. Validity of EMD Forfeiture and Liquidation Thresholds (Issue IV)

  • Contractual Enforcement: The Request For Resolution Plan (RFRP) under clause 1.9.4 explicitly empowers the lender to forfeit the EMD if the successful applicant misses the timeline to submit a performance guarantee or defaults on regulatory milestones. Because the appellant sat on his hands during relaxed timelines (a 45-day COVID-pandemic extension which eventually shrank back to the standard 7 days upon non-compliance), the RP’s forfeiture of the Rs. 1 crore was entirely sound and legal.
  • Paramount Nature of Commercial Wisdom: Citing Manish Kumar v. Union of India (2021) and Sashidhar v. Indian Overseas Bank (2019), the Court reiterated that Section 33(2) and its 2019 Explanation grant the CoC the absolute, unreviewable legislative right to ring the death knell of a Corporate Debtor and mandate liquidation at any stage before a plan’s final judicial affirmation. This collective business choice is completely non-justiciable.

3. Final Directives and Decretal Orders

The Supreme Court rejected the appeals with the following definitive mandates:

  • Appeals Dismissed: Civil Appeal Nos. 12264-12266 of 2024 are dismissed for being entirely devoid of legal merit.
  • Forfeiture and Orders Upheld: The separate concurrent findings of the NCLT and NCLAT validating the forfeiture of the Rs. 1,00,00,000/- EMD and rejecting the appellant’s applications are affirmed.
  • Vacation of Interim Protections: All historical interim stay orders operational against the insolvency or liquidation proceedings stand formally vacated.
  • Liquidation Enforcement: The Respondent No. 3 (Liquidator) is directed to proceed immediately with the remaining statutory phases of the liquidation of M/s. Oracle Home Textiles Limited in strict compliance with the timelines of the Code.
  • Costs: The matter stands disposed of with no order as to costs.

2026 INSC 580

Sanjay Dave V. Andhra Bank Ltd. & Ors. (D.O.J. 27.05.2026)

2026 INSC 580 click here to view full text of judgment

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Admissibility of Deceased Witness Testimony Against Absconding Accused

July 18, 2026 No Comments

Supreme Court allowed the appeals filed by the State of West Bengal, ruling that the deposition of a deceased witness recorded in an earlier trial is admissible in a subsequent trial against an absconding accused, provided the requirements of Section 299 of the Code of Criminal Procedure (CrPC) are met. The Court clarified that the provision serves to preserve evidence when an accused deliberately absconds, preventing them from benefiting from the unavailability of material witnesses due to the passage of time. The Court set aside the High Court’s order, which had denied the admission of the victim’s testimony, confirming that the statutory preconditions—the accused absconding and no immediate prospect of arrest—were satisfied at the time the witness deposed.

  • Background: In a 2012 gang-rape case, the respondent and another accused were absconding while three others were tried and convicted. The victim, a key witness, testified in the first trial but passed away in 2015. After the respondent was arrested in 2016, the prosecution sought to admit the victim’s earlier deposition as evidence under Section 33 of the Indian Evidence Act read with Section 299 of the CrPC.
  • High Court Order: The High Court of Calcutta had rejected the application, observing that the prosecution had a duty to obtain a specific direction from the Trial Court to record evidence against the absconder during the first trial, and thus the earlier deposition could not be used against the respondent.
  • Interpretation of Section 299 CrPC: The Supreme Court held that Section 299 CrPC acts as an exception to the general rule requiring a witness to be examined in the presence of the accused. It does not mandate a formal, prior order from a Magistrate to record that the accused is absconding; rather, what is relevant is whether the conditions—that the accused is absconding and there is no immediate prospect of arrest—were established at the time the evidence was recorded.
  • Preventing Misuse of Process: The Court reasoned that taking a restrictive view of Section 299 would jeopardize the criminal justice system by incentivizing accused persons to wilfully abscond and await the death or unavailability of material witnesses.
  • Application to Facts: The Court noted that the respondent was a declared absconder when the victim’s testimony was recorded (2013), and he remained at large until his arrest in 2016. As the two essential conditions of Section 299(1) were met, the deceased victim’s evidence is admissible in the trial against the respondent.

Legislative Continuity: The Court noted that the legislature has maintained this principle in Section 335 of the recently enacted Bharatiya Nagarik Suraksha Sanhita, 2023, reinforcing the intent to ensure evidence is preserved against those who evade trial.

2026 INSC 718

The State of West Bengal v. Kader Khan – (D.O.J. 17.07.2026)

2026 INSC 718 click here to view full text of judgment

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Insolvency and Bankruptcy: Finality of Resolution Plans and Extinguishment of Sub-judice Claims

July 18, 2026 No Comments

Supreme Court allowed the appeals filed by the Successful Resolution Applicant (Appellant-SRA), ruling that upon the approval of a Resolution Plan under the Insolvency and Bankruptcy Code, 2016 (IBC), all claims—including those pending adjudication (sub-judice)—that are not specifically provided for in the plan stand extinguished. The Court held that the “clean slate” doctrine is fundamental to the IBC, preventing unresolved or contingent claims from resurfacing and undermining the revival of the corporate debtor. Consequently, the Court set aside the High Court orders and dismissed the civil suit and arbitration proceedings initiated by operational creditors, affirming that they are bound by the terms of the approved Resolution Plan.

  • Background: The Appellant-SRA challenged Bombay High Court orders that allowed a civil recovery suit and arbitration proceedings to continue against the corporate debtor (Bhushan Steel Limited) despite the approval of its Resolution Plan. The respondents, operational creditors, sought to pursue claims that were pending at the time of the Corporate Insolvency Resolution Process (CIRP).
  • Treatment of Claims: During the CIRP, the Resolution Professional admitted the respondents’ disputed claims at a notional value of Rupee One (1) each. The approved Resolution Plan stipulated that because the liquidation value was NIL, no amounts were due to operational creditors; however, a settlement fund was provided for those with admitted claims.
  • The “Clean Slate” Doctrine: The Court emphasized that a successful resolution applicant must start on a “clean slate,” free from “hydra-headed” surprise claims. Once a Resolution Plan is approved under Section 31(1) of the IBC, it becomes binding on all stakeholders, and claims not incorporated therein are deemed extinguished, withdrawn, or abated.
  • Finality of the Plan: The Court noted that the Final List of Creditors attained finality, and the respondents could not seek to reopen or question the commercial wisdom of the Committee of Creditors after the plan’s approval. The Court found no merit in the allegations of fraud, noting that no proceedings had been initiated under Rule 11 of the NCLT Rules to challenge the plan’s integrity.
  • No Express Carve-out: Upon a harmonious reading of the Resolution Plan, the Court concluded there was no express “carve-out” protecting sub-judice claims from extinguishment. The plan explicitly mandated that all legal proceedings relating to the period prior to the effective date stand extinguished, except to the extent of the specific settlement amount provided.
  • Observation on MSMEs: In an “Afterword,” the Court observed that the current insolvency framework does not adequately account for the position of small operational creditors and MSMEs, who are often placed at the bottom of the repayment waterfall. The Court suggested that the Legislature and Law Commission examine this to ensure a more balanced repayment mechanism.
  • Outcome: The Court allowed the appeals, set aside the contrary High Court orders, and dismissed the pending civil suit and arbitration proceedings, enforcing the finality of the Resolution Plan.

2026 INSC 717

M/S Tata Steel Ltd. v. Varsha & Anr. (D.O.J. 17.07.2026)

2026 INSC 717 click here to view full text of judgment

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Excluding Nominated Members from Local Authority Elections

July 18, 2026 No Comments

The Supreme Court upheld the High Court of Karnataka’s decision to exclude nominated members of Town Panchayats from participating in Legislative Council elections for Local Authorities’ Constituencies. The Court ruled that under the constitutional framework established by the 74th Amendment (Part IX-A), nominated members, who serve only in an advisory capacity, lack the democratic mandate of elected representatives. Consequently, their inclusion in the electoral roll was declared unconstitutional, and the Court affirmed the direction to conduct a recount of votes after segregating the invalid votes cast by these nominated members.

  • Background: The election to the Karnataka Legislative Council (Chikkamagaluru Local Authorities Constituency) was challenged because 12 nominated members from four Town Panchayats were included in the electoral roll and participated in the voting. The appellant, who won by a narrow margin of 6 votes, contended that the electoral roll’s finality should be respected.
  • Constitutional Interpretation: The Court held that while Article 171(3)(a) mentions “members” of local authorities, this must be interpreted through the lens of the 74th Constitutional Amendment. Article 243-R establishes that while nominated members may be appointed for their expertise, they are expressly barred from voting in municipal meetings, underscoring their advisory rather than representative role.
  • Democratic Representation: The Supreme Court emphasized that allowing nominated members to vote in Legislative Council elections would undermine the democratic nature of the electoral process, as they are not democratically elected. The Court affirmed that “members” in the context of electoral colleges refers to democratically elected representatives.
  • Finality of Electoral Rolls: While acknowledging the principle that electoral rolls typically attain finality, the Court distinguished this case by noting that the inclusion of the nominated members was void ab initio and unconstitutional. Therefore, the finality of the roll could not be used to validate an illegality that strikes at the core of the electoral college’s composition.
  • Secrecy of the Ballot: The Court rejected the argument that segregating these votes would violate the secrecy of the ballot. It maintained that the higher constitutional goal of preserving free and fair elections and ensuring the purity of the electoral process outweighs the requirement for absolute secrecy in this specific context.
  • Outcome: The Supreme Court dismissed the appeals and affirmed the High Court’s orders. The Court directed the authorities to proceed with the consequential actions based on the recount results already obtained, ensuring that the election outcome reflects only the valid votes cast by elected representatives.

2026 INSC 716

Pranesh M.K. v. Shanthegowda & Ors. – (D.O.J. 16.07.2026)

2026 INSC 716 click here to view full text of judgment

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Railway: Establishing Liability in Untoward Railway Incidents

July 18, 2026 No Comments

The Supreme Court set aside the concurrent dismissal of a compensation claim by the Railway Claims Tribunal and the High Court of Madhya Pradesh. The Court held that when a passenger dies in an “untoward incident” (falling from a running train), the absence of a recovered ticket does not automatically negate the status of a bona fide passenger. Emphasizing the “no-fault liability” principle under Section 124A of the Railways Act, 1989, the Court ruled that once the claimant establishes the foundational facts through an affidavit, the burden shifts to the Railways. Technical lapses and the inability to recover personal belongings should not defeat the humanitarian and welfare objectives of the legislation.

  • Background: The appellant filed a claim for compensation following the death of her husband, who fell from a running train while traveling from Raipur to Ahmedabad. The Railway Claims Tribunal and the High Court previously rejected the claim, citing a lack of proof regarding the deceased being a bona fide passenger (specifically due to the missing ticket).
  • Legal Principle (No-Fault Liability): The Court reiterated that Section 124A of the 1989 Act is a beneficial, “no-fault” provision. It is designed to provide expeditious relief to victims of untoward incidents without requiring proof of negligence by the Railway Administration.
  • Burden of Proof: Relying on Union of India v. Rina Devi and Doli Rani Saha v. Union of India, the Court clarified that:
    • The mere absence of a ticket does not disprove that a person was a bona fide
    • The initial burden is on the claimant, which is sufficiently discharged by filing an affidavit stating the facts.
    • Once this is done, the burden shifts to the Railways to disprove the claim based on attending circumstances.
  • Operational Concerns: The Court highlighted the critical issue of chronic overcrowding in Indian Railways. It noted that while the Railway Manuals contain detailed safety and ticketing protocols, the execution often fails. The Court suggested that Railways should increase manpower to better manage safety and ticketing, which could simultaneously reduce such tragedies and provide employment.
  • Constitutional Perspective: The Court observed that using terms like “second class passenger” is outdated and potentially offensive to the spirit of the Constitution of India; it suggested that class designations should refer to the “coach” rather than the “passenger.”

Decision: The Supreme Court allowed the appeal and set aside the lower court judgments. It ordered the Railways to pay compensation of ₹8,00,000 to the appellant within four weeks, failing which the amount would attract interest at 8% from the date of the original claim filing.

2026 INSC 715

Lata v. Union of India & Anr. – (D.O.J. 17.07.2026)

2026 INSC 715 click here to view full text of judgment

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