The IBC Supremacy Wars: As SEBI Battles NCLT at the Supreme Court, Parliament Prepares to Bypass the Tribunal Entirely

If you are a corporate restructuring lawyer in India, July 2026 is shaping up to be a watershed month. The Insolvency and Bankruptcy Code (IBC) is currently fighting a two-front war: one in the Supreme Court to cement its absolute supremacy over market regulators, and another in Parliament to cure its biggest institutional failure—the crippling delays at the National Company Law Tribunal (NCLT).

For years, practicing lawyers have treated Section 238 of the IBC—the non-obstante clause granting the Code overriding effect—as a magic wand. But regulators have consistently refused to bow down. Now, that turf war has reached the apex court, just as the legislature is quietly changing the rules of the game to bypass the NCLT altogether.

SEBI vs. IBC: Who Controls the Corporate Debtor’s Assets?

The Securities and Exchange Board of India (SEBI) has finally knocked on the Supreme Court’s doors to challenge the NCLT’s jurisdiction over Collective Investment Schemes (CIS). The conflict is classic: SEBI attaches assets under the SEBI Act to protect investors, while the NCLT admits the same corporate debtor into the Corporate Insolvency Resolution Process (CIRP), triggering the moratorium under Section 14.

The NCLT and NCLAT have consistently ruled that the IBC prevails. Just recently, the NCLAT delivered a landmark judgment involving BSE Limited, upholding the NCLT’s power to direct the de-freezing of a corporate debtor’s demat accounts that were frozen under securities regulations.

"When regulatory policies hinder the efficient realization of a corporate debtor’s assets, the IBC must override securities law to ensure value maximization."

Why this matters for your practice: If you represent Resolution Professionals (RPs), you know the absolute nightmare of regulatory attachments. RPs spend months litigating against SEBI, the Enforcement Directorate (ED), or the EPFO just to take control of the debtor’s estate. The NCLAT's recent stance on demat accounts gives RPs immense leverage.

However, with the Supreme Court scheduled to hear SEBI’s challenge this month, the stakes are existential. Our take? Expect the Supreme Court to uphold IBC supremacy. The jurisprudence established in cases like Innoventive Industries and Sundaresh Bhatt (regarding customs authorities) heavily favors the Code. SEBI’s argument that CIS funds are held in trust and do not form part of the debtor's estate will be a tough sell against the absolute mandate of Section 238.

The Amendment Bill 2025: The End of the Section 7 Admission Circus?

While the tribunals defend their jurisdiction against regulators, Parliament has frankly grown tired of the NCLT’s inefficiency. Pre-admission delays have become the Achilles' heel of the IBC. To fix this, the Insolvency and Bankruptcy (Amendment) Bill 2025—passed by the Lok Sabha in March 2026 and currently awaiting Rajya Sabha approval—introduces a radical concept: the Creditor-Initiated Insolvency Resolution Process.

Under this new mechanism, financial creditors can trigger insolvency without filing a Section 7 petition before the NCLT. If lenders holding 51% or more of the debt approve, they can bypass the tribunal entirely via a public announcement.

The Practice Shift: Let’s be blunt—this will decimate the pre-admission litigation practice. Currently, corporate debtors drag out Section 7 hearings for years, disputing the date of default, the quantum of debt, or relying on the Vidarbha Industries precedent to argue that the NCLT has the discretion to dismiss the petition.

This amendment pulls the rug out from under defaulting promoters. For transactional lawyers and banking counsel, this means faster mandates and a shift from courtroom advocacy to boardroom strategy. Once enacted, expect a massive drop in standard Section 7 filings and a surge in out-of-court creditor consensus-building. Furthermore, the Bill’s strict 30-day limit for NCLT to approve/reject resolution plans, and 180-day limit for liquidation, signals zero tolerance for judicial delays.

Setting the Boundaries: Section 60(5) and the Operational Creditor Squeeze

While the IBC expands its reach against regulators, the tribunals are simultaneously pruning their own jurisdictional overreach in civil matters. In May 2026, the NCLT Kolkata laid down a crucial marker: ownership and title disputes over property cannot be decided under Section 60(5) of the IBC.

This aligns perfectly with the Supreme Court’s long-standing Embassy Property doctrine. The NCLT is a summary jurisdiction; it is not a civil court. If a corporate debtor claims title to a disputed property, the RP must pursue the matter in a competent civil court, not force it into the CIRP umbrella via Section 60(5).

Simultaneously, the NCLAT has shut the door on Operational Creditors (OCs) trying to derail resolution plans. In a March 2026 order, the appellate tribunal reaffirmed that as long as a resolution plan complies with Section 30(2)(b)—meaning OCs receive at least their liquidation value—the tribunal will not interfere. With creditors already realizing over Rs 4 lakh crore by early 2026, the message is clear: commercial wisdom of the Committee of Creditors (CoC) remains unassailable, and OCs must accept their statutory haircuts.

The Bottom Line

The practice of insolvency law in India is undergoing a violent structural shift in 2026. If you are a litigator, your battlefield is moving. Routine admission battles will soon vanish, replaced by complex, high-stakes clashes over regulatory overlaps, asset tracing, and civil title disputes. The IBC is no longer just a recovery tool; it is the absolute epicenter of Indian commercial law. Adapt your practice accordingly.