IBC's Hegemony: The 2026 Amendment Kills the 'Vidarbha' Defense as NCLAT Strips SEBI of its Turf

The Code Takes No Prisoners in 2026

If you are practicing before the National Company Law Tribunal (NCLT) this summer, you need to tear up your standard templates. June 2026 is shaping up to be the month the Insolvency and Bankruptcy Code (IBC) stopped asking for regulatory permission and started demanding absolute compliance. Between the newly enacted IBC (Amendment) Act, 2026 and a series of aggressive rulings from the NCLAT, the message to Corporate Debtors and rival regulators alike is clear: The IBC is the apex predator of Indian corporate law.

For practitioners, two massive developments are rewriting the rules of engagement: the legislative reversal of the disastrous Vidarbha Industries precedent, and a high-stakes jurisdictional war where the NCLAT has effectively told the Securities and Exchange Board of India (SEBI) to back off during insolvency proceedings.

The Fall of Vidarbha: Section 7 Returns to its Roots

Let’s be honest—ever since the Supreme Court’s 2022 ruling in Vidarbha Industries Power Ltd. v. Axis Bank Ltd., Section 7 admissions have been a procedural nightmare. By holding that the word "may" in Section 7(5)(a) gave the NCLT discretion to reject an application even if debt and default were clearly established, the apex court handed Corporate Debtors a golden stalling tactic. Suddenly, admission hearings turned into mini-trials about the macroeconomic health of the debtor.

The IBC (Amendment) Act, 2026, which received Presidential assent in April, finally cures this judicial hangover. The legislature has stepped in to restore the mandatory-admission approach. If there is a debt, and there is a default, the CD must go into the Corporate Insolvency Resolution Process (CIRP).

"The 2026 Amendment strips the Adjudicating Authority of the unwarranted equitable discretion it assumed post-Vidarbha. For Financial Creditors, certainty has returned. For CD counsels, your favorite delay tactic is dead."

Practice Point: If you are representing a Financial Creditor, it is time to push for expedited hearings. The NCLT can no longer entertain endless pleadings about the CD’s "potential for revival outside CIRP" at the pre-admission stage. Furthermore, the introduction of the Creditor-Initiated Insolvency Resolution Process (CIIRP) and tighter timelines for the Committee of Creditors (CoC) means the resolution professional and creditors are firmly back in the driver's seat.

Section 238 Unleashed: NCLAT Throws SEBI Out of the Ring

While the legislature fixes Section 7, the NCLAT is busy weaponizing Section 238 of the IBC (the non-obstante clause) to defeat rival regulators. A massive legal conflict has erupted over who controls assets tied up in Collective Investment Schemes (CIS).

SEBI has historically guarded its jurisdiction over CIS entities under the SEBI Act with extreme jealousy. But when SEBI and the NCLT passed conflicting orders over the same CIS entities, the NCLAT did not blink. Upholding the NCLT's jurisdiction, the appellate tribunal ruled that the IBC overrides the SEBI Act.

This wasn't an isolated incident. In a parallel landmark ruling involving BSE Limited, the NCLAT directed the de-freezing of a corporate debtor's demat accounts, which had been frozen under securities regulations. The tribunal bluntly stated that securities regulatory policies cannot hinder the realization of a corporate debtor's assets under the IBC.

From a jurisprudential standpoint, the NCLAT is absolutely correct. You cannot have dual control of an estate during CIRP; it defeats the very objective of value maximization and time-bound resolution. If SEBI is allowed to ring-fence securities assets, the resolution plan becomes a dead letter. SEBI has naturally panicked and rushed to the Supreme Court, with hearings slated for July 2026.

What to watch for: The Supreme Court’s July decision will be the most consequential corporate law judgment of 2026. If the SC upholds the NCLAT’s interpretation, expect a floodgate of applications under Section 60(5) by Resolution Professionals to unfreeze assets locked up by the Enforcement Directorate (ED), the Employees' Provident Fund Organisation (EPFO), and state tax authorities.

Personal Guarantors and The Automatic Moratorium

We are also seeing critical clarifications on personal insolvency. In Siemens Financial Services v. Ravi Kumar Jain, the NCLAT reiterated a strict reading of Section 95. The tribunal observed that the interim moratorium commences automatically the moment a Section 95 application is filed, provided it isn't filed before a tribunal patently lacking jurisdiction.

This is a double-edged sword for practitioners. It offers immediate breathing room for personal guarantors, but it also creates procedural traps. Litigants who file defective appeals hoping to cure them later are out of luck. As the Supreme Court held last month in CA Ramchandra Dallaram Choudhary v. Adani Infrastructure, you cannot circumvent the strict limitation regime under Section 61 by filing placeholder, defective appeals. The courts are losing patience with sloppy drafting.

A Boundary Line: Section 60(5) is Not a Civil Court

Lest we think the NCLT’s power is entirely unbounded, the NCLT Kolkata recently laid down a crucial marker. Dismissing an application under Section 60(5), the tribunal ruled that complex ownership and title disputes over property claimed by the Corporate Debtor must be decided by civil courts, not the NCLT.

This is a welcome dose of common sense. The NCLT exercises summary jurisdiction. It is not equipped to examine evidence, cross-examine witnesses, and decide complex title suits. Resolution Professionals must be careful not to use Section 60(5) as a lazy shortcut to bypass the Civil Procedure Code.

The Road Ahead: Prepare for a Faster NCLT

The substantive law is becoming more creditor-friendly, but what about the infrastructure? The government has finally woken up to the massive backlog and is planning to add up to 100 new members to the NCLT bench.

For Indian corporate lawyers, the second half of 2026 will be hyper-active. With the Vidarbha hurdle removed, a 100-member-strong NCLT, and the NCLAT aggressively shielding CIRP from SEBI's interference, the IBC is returning to its original promise: swift, decisive, and uncompromising creditor control. Update your drafts, inform your clients, and brace for impact.