Tardy litigators engaged in fractious and opulent litigations can't cite judicial discipline: SC

The Supreme Court has clarified that outdated litigation or delayed schemes cannot be used to stall insolvency proceedings, particularly in cases where public funds and economic interests are involved.

A bench comprising Justices Sanjay Kumar and K V Vinod Chandran made the observation while deciding an appeal filed by Omkara Assets Reconstruction Private Limited.

The Court emphasized that the principle of judicial discipline cannot be invoked by litigants who delay proceedings and engage in prolonged disputes that jeopardize financial recovery and economic stability.

Supreme Court on delay tactics in insolvency cases

The bench observed that judicial discipline is an important principle that ensures fairness, equity and public trust in the judicial system.

However, the Court held that this principle cannot be used by litigants who repeatedly delay proceedings through prolonged and contentious litigation.

The Court stated that such tactics can put public funds at risk and adversely affect the functioning of industries.

According to the Court, cases involving insolvency have broader implications because they concern financial recovery, economic stability and rehabilitation of businesses.

The bench said that when insolvency proceedings are initiated under the Insolvency and Bankruptcy Code (IBC), the objective is not only recovery of debts but also revival and rehabilitation of companies where possible.

Background of the dispute

The case arose from proceedings initiated under Section 7 of the Insolvency and Bankruptcy Code, where Omkara Assets Reconstruction Private Limited sought recovery of an amount exceeding Rs 154 crore.

The corporate debtor resisted the insolvency proceedings on the ground that a Scheme of Arrangement (SOA) was already pending before the Punjab and Haryana High Court under Sections 391 to 394 of the Companies Act.

It was also alleged that the appellant had suppressed this fact before the adjudicating authority.

The National Company Law Tribunal (NCLT) examined the matter and found that the corporate debtor had failed to comply with the procedural requirements under the Companies Act relating to the scheme.

The tribunal also noted that the scheme had effectively become non functional due to the passage of time.

The NCLT therefore allowed the insolvency application and invoked the provisions of the IBC.

NCLAT order challenged

The order of the NCLT was challenged before the National Company Law Appellate Tribunal (NCLAT) by the erstwhile director of the corporate debtor.

The NCLAT kept the insolvency proceedings in abeyance until the disposal of the scheme related proceedings pending before the Punjab and Haryana High Court.

This order was challenged before the Supreme Court.

The Supreme Court examined the record and noted that the scheme of arrangement had been proposed in 2008, and there had been a delay of nearly ten years in seeking sanction of the scheme.

The Court found that the statutory timelines prescribed under the Companies Act had not been followed.

The bench observed that the terms of the scheme would have become outdated and impractical due to the passage of time.

The Court held that there was no reasonable explanation for such prolonged delay.

According to the bench, the scheme had effectively become redundant and inoperative, making it incapable of blocking insolvency proceedings.

IBC proceedings should not be stalled

The Court emphasized that insolvency proceedings under the IBC cannot be stalled merely because older proceedings or schemes are pending under other laws.

It noted that the IBC has an overriding effect over inconsistent provisions in other laws.

The bench also pointed out that compromises or arrangements between parties can still be considered under Section 230 of the Companies Act, 2013 during the insolvency process at an appropriate stage.

Accordingly, the Supreme Court set aside the order of the NCLAT and restored the decision of the NCLT allowing the insolvency proceedings to continue.

The Court held that there was no reason to delay the corporate insolvency resolution process in the present case.

Case Title: Omkara Assets Reconstruction Private Limited Vs Amit Chaturvedi and Ors

Bench: Justices Sanjay Kumar and K V Vinod Chandran

Date of Judgment: February 24, 2026