{"id":399362,"date":"2026-10-21T10:30:45","date_gmt":"2026-10-21T05:00:45","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=399362"},"modified":"2026-10-21T10:17:50","modified_gmt":"2026-10-21T04:47:50","slug":"sc-iu-record-of-default-section-7-ibc-admission","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2026\/10\/21\/sc-iu-record-of-default-section-7-ibc-admission\/","title":{"rendered":"Record of default from Information Utility is enough to admit a petition; disputes over amount and a company’s profits do not stop CIRP: Supreme Court"},"content":{"rendered":"
\n

Supreme Court:<\/span> In two appeals against the NCLAT’s judgment upholding the admission of GSTAAD Hotels Pvt. Ltd. and Neo Capricorn Plaza Pvt. Ltd. into CIRP, the Division Bench of Augustine George Masih*<\/span> and Dipankar Datta, JJ. held that at the admission stage, default only has to be shown on a preponderance of probabilities from the documents on record. The Court said the adjudicating authority (AA) does not need to work out the exact amount owed. It also held that a record of default from an information utility (IU) is enough by itself, and that a company being profitable is no answer to default.<\/p>\n

Background<\/p>\n

In December 2017, Piramal Finance Ltd. (later “PCHFL”), gave a ₹600 crore loan to GSTAAD Hotels (which runs the JW Marriott, Bangalore) and Neo Capricorn Plaza (which runs the Crowne Plaza, Pune) as co-borrowers. GSTAAD also took two loans under the Emergency Credit Line Guarantee Scheme (ECLGS), and Neo took one. A Cash Management Agreement (CMA) was signed under which hotel revenue went into a Revenue Account, 66 per cent of which went to an Expense Account and 34 per cent to a Retention Account for servicing debt. A Debt Service Reserve Account (DSRA) was also required.<\/p>\n

On 27 December 2022, the lenders assigned all the facilities to Omkara Assets Reconstruction Pvt. Ltd. Form D default filings were registered with NeSL on 9 February 2023. Omkara recalled the loans on 15 February 2023 and filed Section 7 petitions on 9 March 2023, giving 15 November 2022 as the date of default. The NCLT admitted the petitions on 9 January 2024, but the NCLAT set the orders aside on 8 January 2025 and sent the matter back for fresh hearing without expressing a final view on the issues. After rehearing, the NCLT admitted the petitions again on 8 July 2025, and the NCLAT affirmed this on 19 August 2025.<\/p>\n

Separately, GSTAAD had challenged the assignment before the Karnataka High Court. It lost before the Single Judge and the Division Bench, and its SLP was dismissed by the Supreme Court on 25 August 2025.<\/p>\n

The appellants argued that the CMA and DSRA, if applied properly, would show there was no default. They said the Section 7 application did not plead default in the term loan, that the ECLGS dues were not payable on that date, that both companies were profitable with positive EBITDA, and that putting running hotels into insolvency defeats the purpose of the Code. They relied on Vidarbha Industries Power Ltd.<\/span> v. Axis Bank Ltd.<\/span>, (2022) 8 SCC 352<\/a>.<\/p>\n

The appellants also contended that the NCLAT’s remand findings on the CMA, DSRA and ECLGS proceeds had attained finality as res judicata. Omkara countered that the debtor never denied the debt, that its plea of curing default through the DSRA and CMA was in substance a concession that default occurred, and that the default as on 15 November 2022 was ₹17.16 crore for GSTAAD and a minimum of ₹2.65 crore for Neo.<\/p>\n

Issues<\/p>\n

    \n
  1. \n

    Whether Omkara was a financial creditor under Section 5(7) after the assignment.<\/p>\n<\/li>\n

  2. \n

    What evidentiary threshold must be met to satisfy the AA that a “default” under Sections 3(12) and 7 has occurred.<\/p>\n<\/li>\n

  3. \n

    What kind of documentary material the AA can rely on to record that satisfaction<\/p>\n<\/li>\n<\/ol>\n

    Analysis and Findings<\/p>\n

    The Court was called upon to determine the scope of its appellate jurisdiction under Section 62<\/a>, Insolvency and Bankruptcy Code, 2016<\/a> (IBC), whether Omkara qualified as a financial creditor, what threshold of default must be met for admission under Section 7, and what documents suffice to establish default at that stage.<\/p>\n

    On the scope of the appeal, the Court noted that Section 62 permits an appeal only on a question of law. Where the NCLT and NCLAT had reached the same findings on the same material, it would interfere only if the findings were perverse, based on no evidence, ignored material evidence or applied a wrong legal standard. Relying on Maitreya Doshi v. Anand Rathi Global Finance Ltd.<\/span>, (2023) 17 SCC 606<\/a>, Devas Multimedia (P) Ltd. v. Antrix Corpn. Ltd.<\/span>, (2023) 1 SCC 216<\/a> and Kalyani Transco v. Bhushan Power & Steel Ltd.<\/span>, 2025 SCC OnLine SC 2093<\/a>, the Court observed that specialised tribunals dealing with accounts and financial documents should not be second-guessed lightly.<\/p>\n

    On the status of Omkara<\/span>, the Court noted that Section 5(7) expressly includes a person to whom a debt has been legally assigned. The validity of the assignment had already been decided up to the Supreme Court in the Karnataka proceedings between the same parties, and the Court held that reopening it was barred by estoppel. It added that the adjudicating authority under Section 7 cannot sit in appeal over constitutional courts and was right to decline to re-examine the assignment.<\/p>\n

    On the threshold for default, the Court noted that Section 3(12) defines default as non-payment when the whole or any part or instalment of the debt is due and unpaid, and described this threshold as deliberately undemanding. It distinguished between the occurrence of default, which is a fixed historical event, and the amount outstanding, which keeps changing with interest, charges and part-payments. Section 7 is concerned with the former. The 14-day period in Section 7(4) shows that the inquiry is meant to be summary, and the Adjudicating Authority is not expected to reconcile every ledger entry as a civil court would in a recovery suit. The exact quantum is dealt with later by the Resolution Professional under Section 18 and the CIRP Regulations. The Court held that the threshold is summary and prima facie, is met on a preponderance of probabilities, and that disputes over quantum do not negate default as long as the Section 4 threshold is crossed.<\/p>\n

    On the documents that establish default, the Court laid down 2 tiers. At the first tier is the record of default from an information utility. Since the debtor receives notice, three reminders and an opportunity to dispute the filing, the Court treated authentication as working like an admission, with Section 115<\/a>, Evidence Act, 1872<\/a> (Section 121, Sakshya Adhiniyam, 2023) preventing the debtor from later denying it. The Court noted that Section 7(3)(a) places the Information Utility record first among the materials a financial creditor may furnish, and that Section 7(4) directs the Adjudicating Authority to ascertain default from the records of an Information Utility, with other evidence only in the alternative, making the record a self-sufficient basis for ascertainment. The record is not irrebuttable, but it carries a presumption of very high evidentiary value that can be displaced only by clear, cogent, credible and compelling material, and not by bare denial or bookkeeping disagreements. Standing alone, it is enough to prima facie to establish default. At the second tier are the other documents listed in Part V of Form 1 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016<\/a>, such as loan agreements, account statements, balance confirmations, acknowledgements of liability and correspondence. None of these is sufficient on its own but taken together they can establish default on the summary standard.<\/p>\n

    The Court noted that the four NeSL Form D filings were deemed authenticated and had gone unchallenged, which confirmed that default was registered. The Court observed that the corporate debtor’s real case was that default had been cured through the DSRA and CMA, and not that there was no default. The specific figure of ₹17.16 crore as on 15 November 2022 (and ₹2.65 crore for Neo) was therefore properly taken from the statements of account furnished by Omkara, never disputed as to authenticity and produced by the debtor itself, the two BK Ramadhyani review reports (which questioned only the interest rate and not the computation of default), the recall notice and the debtor’s own letters seeking settlement. The Court held that there was no inconsistency between this and the NeSL filings, and that the difference in figures did not matter.<\/p>\n

    The Court further noted that the debtor’s letter of 23December 2022 admitted that it could not service the debt, written within six weeks of the pleaded date of default and before the assignment, recorded that the rise in interest rate had curtailed plans to commence repayment of principal, that the entire surplus cash flow had been absorbed in servicing the additional interest, and that the ECLGS funds had been applied principally towards the lenders’ interest and repayment of the loan. The Court held that this could not be reconciled with the claim that nothing was due on 15 November 2022. It also took into account the admission recorded by the Karnataka High Court in the debtor’s own writ petition. The NCLT had additionally found that cash accruals remained short of debt obligations until December 2023, so the shortfall was not a one-off mistake in a single month.<\/p>\n

    On the plea of profitability, the Court held that profit and the ability to pay debts are different things. EBITDA is calculated before interest and says nothing about whether a company can meet its loan obligations as they fall due. The company’s own audited statements showed a debt service coverage ratio of 0.12 for 2022-2023, meaning internal accruals covered only 12 per cent of that year’s debt obligations. The Court observed that the Code uses default, and not balance-sheet insolvency, as the trigger because it is meant to step in early and not wait for a company to collapse.<\/p>\n

    The Court took note of the Insolvency and Bankruptcy Code<\/a>. (Amendment) Act, 2026, which changed Section 7(5)(a<\/span>) so that the adjudicating authority “shall” admit an application once it is satisfied that default has occurred, the application is complete, and no disciplinary proceeding is pending against the proposed resolution professional. Explanation I bars any other ground for rejection, and Explanation II makes an information utility record of default, filed by a financial institution, sufficient to ascertain default. The Court held that these changes are clarificatory and create no new law, and that its reasoning would have been the same without them. It added that after nearly ten years, corporate debtors can no longer claim unfamiliarity with the authentication process or the consequences of staying silent, and that adjudicating authorities must give information utility records the weight the Code gives them.<\/p>\n

    The Court also recorded that the appellants’ compilation of judgments was objected to by the respondents as containing AI-generated, non-existent judgments. The Advocate-on-Record tried to put the blame on the appellants, and the senior counsel took the blame on himself and asked for forgiveness. The Court heard the appeal on merits while keeping the respondents’ objection open and had proposed exemplary costs. Since the first appellant has since died, the costs were dropped. The Court also held that under Order XXII Rule 6<\/a> CPC<\/a> the appeal did not abate.<\/p>\n

    Decision<\/p>\n

    The Supreme Court found no merit in either appeal and dismissed both. The NCLT orders dated 8 July 2025 in CP (IB) Nos. 291 and 290 of 2023, as affirmed by the NCLAT on 19 August 2025, were upheld, and CIRP will proceed against both corporate debtors in accordance with law. There was no order as to costs.<\/p>\n

    [Deepak Raheja<\/span> v. Omkara Assets Reconstruction (P) Ltd.<\/span>, 2026 SCC OnLine SC 2184<\/a>, decided on 15-10-2026<\/span>]<\/p>\n

    *Judgment authored by Justice Augustine George Masih<\/a><\/span><\/strong><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    The Court looked at what a financial creditor must show to prove “default under Section 7 of the IBC”, and what kind of documents the adjudicating authority can rely on to be satisfied that default has occurred.<\/p>\n","protected":false},"author":67011,"featured_media":399363,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,9],"tags":[117634,33041,117627,117630,117631,117624,117629,25934,117632,101938,43744,58527,40866,117633,117626,37939,117625,114518,117628,33589,5363],"class_list":["post-399362","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-casebriefs","category-supremecourt","tag-ai-generated-judgments-in-court","tag-assignment-of-debt","tag-cirp-admission","tag-debt-service-coverage-ratio","tag-deepak-raheja-v-omkara-assets-reconstruction","tag-default-under-ibc","tag-ebitda","tag-financial-creditor","tag-gstaad-hotels","tag-ibc-amendment-act-2026","tag-information-utility","tag-justice-augustine-george-masih","tag-justice-dipankar-datta","tag-neo-capricorn-plaza","tag-nesl","tag-preponderance-of-probabilities","tag-record-of-default","tag-section-312-ibc","tag-section-57-ibc","tag-section-7-ibc","tag-supreme-court"],"yoast_head":"\nSC: IU record of default enough for Section 7 IBC admission | SCC Times<\/title>\n<meta name=\"description\" content=\"Supreme Court holds IU record of default suffices for Section 7 IBC admission; disputes over amount and profitability don't stop CIRP.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.scconline.com\/blog\/post\/2026\/10\/21\/sc-iu-record-of-default-section-7-ibc-admission\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Record of default from Information Utility is enough to admit a petition; disputes over amount and a company's profits do not stop CIRP: Supreme Court\" \/>\n<meta property=\"og:description\" content=\"Supreme Court holds IU record of default suffices for Section 7 IBC admission; disputes over amount and profitability don't stop CIRP.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.scconline.com\/blog\/post\/2026\/10\/21\/sc-iu-record-of-default-section-7-ibc-admission\/\" \/>\n<meta property=\"og:site_name\" content=\"SCC Times\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/scc.online\/\" \/>\n<meta property=\"article:published_time\" content=\"2026-10-21T05:00:45+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.scconline.com\/blog\/wp-content\/uploads\/2026\/10\/IU-record-of-default.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"886\" \/>\n\t<meta property=\"og:image:height\" content=\"590\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Editor\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Record of default from Information Utility is enough to admit a petition; disputes over amount and a company's profits do not stop CIRP: Supreme Court\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Editor\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2026\\\/10\\\/21\\\/sc-iu-record-of-default-section-7-ibc-admission\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2026\\\/10\\\/21\\\/sc-iu-record-of-default-section-7-ibc-admission\\\/\"},\"author\":{\"name\":\"Editor\",\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/#\\\/schema\\\/person\\\/84e42bab48238baf12c7e33b3d9761fe\"},\"headline\":\"Record of default from Information Utility is enough to admit a petition; disputes over amount and a company’s profits do not stop CIRP: Supreme Court\",\"datePublished\":\"2026-10-21T05:00:45+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2026\\\/10\\\/21\\\/sc-iu-record-of-default-section-7-ibc-admission\\\/\"},\"wordCount\":1820,\"commentCount\":0,\"image\":{\"@id\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/post\\\/2026\\\/10\\\/21\\\/sc-iu-record-of-default-section-7-ibc-admission\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.scconline.com\\\/blog\\\/wp-content\\\/uploads\\\/2026\\\/10\\\/IU-record-of-default.webp\",\"keywords\":[\"AI-generated judgments in court\",\"Assignment of Debt\",\"CIRP admission\",\"Debt Service Coverage Ratio\",\"Deepak Raheja v. 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