The Death of the 'Defective Filing' Loophole and the IBC Turf War: SC Tightens Appeals while NCLAT Expands Section 60(5)

The End of the "Diary Number" Strategy

For years, commercial litigators in India have relied on a poorly kept procedural secret: when you are out of time to file an appeal, file a defective one. Dump a skeletal memo of appeal with missing annexures or unsigned vakalatnamas into the registry, secure a diary number to stop the limitation clock, and buy yourself weeks to "cure" the defects. With the Supreme Court's latest ruling in CA Ramchandra Dallaram Choudhary v. Adani Infrastructure and Developers Private Limited (2026 INSC 629), this era of procedural leniency is officially dead.

The Supreme Court has unequivocally held that a litigant cannot bypass the strict limitation regime under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) by filing a defective appeal and subsequently curing the defects after the limitation period has expired. Section 62 provides a strict 45-day window for appeals to the Supreme Court. Unlike the Limitation Act, 1963, where courts historically exercised broad equitable discretion to condone delays, the IBC operates on a rigid timeline essential for value maximization.

"The practice of filing incomplete, dummy appeals merely to arrest the limitation clock makes a mockery of the time-bound nature of the IBC. The Supreme Court has rightly recognized that a defective filing is, in the eyes of the law, no filing at all until cured—and if that cure happens outside the statutory window, the appeal is barred."

Why this matters for your practice: If you represent a corporate debtor or a disgruntled creditor, the midnight scrambling to file an incomplete PDF just to get a filing receipt will now result in an outright dismissal. The registry's defect-curing timeline cannot be used as a backdoor extension to the statutory limitation period. Law firms must now treat the 45-day deadline as the absolute deadline for a flawless filing.

Expanding NCLT's Reach: The SEBI vs. IBC Turf War

While the Supreme Court is tightening the procedural noose, the NCLAT is aggressively expanding the substantive jurisdiction of the NCLT. In a landmark appellate decision involving BSE Limited, the tribunal addressed a burning jurisdictional question: Can the NCLT order the de-freezing of a corporate debtor's demat accounts that were frozen under securities law?

The NCLAT answered with a resounding yes, upholding the NCLT's power under the residuary jurisdiction of Section 60(5) of the IBC. Market Infrastructure Institutions (MIIs) like the BSE argued that demat regulations fall strictly under the purview of the Securities and Exchange Board of India (SEBI). However, the NCLAT correctly treated the de-freezing of assets as directly arising out of the insolvency resolution process.

This is a major victory for resolution professionals. When a company enters Corporate Insolvency Resolution Process (CIRP), the Resolution Professional (RP) has a statutory duty under Section 18 to take control of all assets. Allowing SEBI or stock exchanges to hold demat accounts hostage would paralyze the RP. This decision reaffirms the supremacy of the IBC's non-obstante clause (Section 238) over conflicting securities regulations. For practitioners, this means Section 60(5) remains the ultimate Swiss Army knife for RPs to clear regulatory hurdles.

Commercial Wisdom Remains Untouchable

If there was any lingering hope that tribunals might develop an "equity jurisdiction" to protect operational creditors, the NCLAT has squashed it. In Mohammed Ismail Ansari v. Mamta Binani (Company Appeal (AT) (Insolvency) No. 241 of 2026), the appellate tribunal reiterated that a resolution plan cannot be interfered with if it complies with Section 30(2)(b) of the IBC.

Operational creditors routinely challenge plans where financial creditors take minor haircuts while operational creditors are given pennies on the dollar. The NCLAT's ruling is blunt: as long as operational creditors and dissenting financial creditors receive at least their liquidation value (which, in many cases, is absolute zero), the NCLT cannot second-guess the commercial wisdom of the Committee of Creditors (CoC). Litigators advising operational creditors must manage client expectations—unless there is a material irregularity or fraud, challenging an approved plan is a fool's errand.

The Elephant in the Room: The Proposed IBC Bypass

The most fascinating development of 2026 isn't happening in the courtrooms, but in the legislature. As reported late this March, the Ministry of Corporate Affairs is pushing a massive bankruptcy-law reform bill that would allow financial creditors to trigger an insolvency process outside the tribunal initiation, subject to a 51% lender approval threshold.

This is a damning indictment of the NCLT's admission delays. Despite the Supreme Court clarifying that admission of Section 7 applications is generally mandatory upon default, pre-admission litigation regarding the quantum of debt and date of default routinely drags on for over a year. By allowing creditors to bypass the NCLT admission stage altogether, the government is attempting to restore the speed that the IBC has lost.

If passed, this will fundamentally alter insolvency practice. The battleground will shift from the NCLT admission hearings to the inter-creditor agreements and joint lenders' forums. Lawyers who have built lucrative practices arguing over technicalities at the admission stage will need to pivot toward restructuring advisory and CoC management.

Between the Supreme Court closing appellate loopholes, the NCLAT fortifying the supremacy of the CIRP, and the legislature planning to bypass the tribunal's admission bottleneck, the message to the bar is clear: the era of weaponizing delays in Indian insolvency law is rapidly coming to an end.