SC: Information utility record of default is enough to admit insolvency plea; upholds CIRP against owners of JW Marriott Bengaluru, Crowne Plaza Pune

The Supreme Court has ruled that an authenticated record of default from an information utility (IU) is, on its own, sufficient for the National Company Law Tribunal (NCLT) to admit a financial creditor’s insolvency petition. Such a record carries a presumption that a corporate debtor can displace only with “clear, cogent, credible and compelling material”, the court said.

A bench of Justices Dipankar Datta and Augustine George Masih dismissed appeals by GSTAAD Hotels Pvt Ltd and Neo Capricorn Plaza Pvt Ltd on Thursday (October 15). The two companies own and operate the JW Marriott Hotel in Bengaluru and the Crowne Plaza Hotel in Pune. The ruling upholds the start of the corporate insolvency resolution process (CIRP) against both companies on petitions filed by Omkara Assets Reconstruction Pvt Ltd.

The judgment, written by Justice Masih and reported as 2026 INSC 1134, sets out a two-tier “hierarchy” of evidence for proving default under Section 7 of the Insolvency and Bankruptcy Code (IBC). The first tier is a record of default issued by an information utility, which is “by itself sufficient”. The second tier covers other material listed in Part V of Form 1 of the IBC application rules, including loan agreements, account statements, balance confirmations, acknowledgements of liability and correspondence. None of these is sufficient alone, but taken together they can establish default.

Default is static, quantum is dynamic

The court held that the standard at the admission stage is a summary, prima facie test on a preponderance of probabilities. It is not a “forensic reconciliation of accounts”.

The bench distinguished between the occurrence of default, which it called “a static historical event”, and the quantum outstanding, which keeps changing with interest, charges and part-payments. Disputes over interest rates or accounting entries “do not negate the occurrence of default”. Such disputes are for the resolution professional to settle during claim verification, the court said. The 14-day deadline under Section 7(4) would be “unintelligible” if the NCLT had to reconcile every contested ledger entry, it added.

On IU records, the court reasoned that a debtor who lets a filing go unchallenged through the authentication process, which includes three reminders, is barred from later denying the default. It relied on Section 31 (admissions) and Section 115 (estoppel) of the Indian Evidence Act, and their counterparts in the Bharatiya Sakshya Adhiniyam, 2023. The court said nearly ten years after the code came into force, debtors “can no longer claim unfamiliarity” with authentication or the consequences of staying silent.

The bench said its conclusions are reinforced by the IBC (Amendment) Act, 2026, notified in April. The Act made admission under Section 7(5)(a) mandatory and added an Explanation II declaring an IU record of default filed by a financial institution “sufficient”. The court said these explanations “do not create new law” and that its reasoning would have been the same without the amendment.

EBITDA no defence

The court rejected the hotel companies’ argument that their positive EBITDA made insolvency proceedings contrary to the code’s purpose. GSTAAD and Neo reported EBITDA of Rs 81 crore and Rs 10 crore respectively in FY23. The bench noted that EBITDA is calculated before interest and “says nothing whatsoever” about a company’s ability to pay its lenders. It pointed to GSTAAD’s own audited accounts, which showed a debt service coverage ratio of 0.12 for 2022-23, meaning internal accruals covered only 12% of that year’s debt obligations.

The code uses default, not balance-sheet insolvency, as its trigger because it is built on “timely intervention rather than terminal insolvency”, the court said.

The debt

Piramal Finance (later Piramal Capital and Housing Finance) lent Rs 600 crore under a December 2017 loan agreement:

• a Rs 450 crore term loan and a Rs 50 crore rolling credit facility to GSTAAD
• a Rs 100 crore term loan to Neo

GSTAAD also took two Emergency Credit Line Guarantee Scheme (ECLGS) facilities of Rs 98 crore and Rs 65 crore. Neo took one of Rs 19.5 crore.

Piramal assigned the loans to Omkara on December 27, 2022. Defaults were registered with National E-Governance Services Ltd (NeSL) on February 9, 2023, and Omkara recalled Rs 666.53 crore from GSTAAD and about Rs 120 crore from Neo on February 15, 2023. The NCLT Mumbai first admitted the petitions in January 2024. The NCLAT sent them back for fresh hearing in January 2025. The NCLT admitted them again on July 8, 2025, and the NCLAT upheld that order on August 19, 2025.

Both tribunals put GSTAAD’s default as on November 15, 2022 at Rs 17.16 crore, and Neo’s at a minimum of Rs 2.65 crore. The companies argued that funds in the cash management escrow and the debt service reserve account (DSRA) would have cured the default. The court rejected this, citing four pieces of evidence:

• a December 23, 2022 letter from the promoter to lenders admitting cash flows had been absorbed by higher interest
• a one-time settlement offer of Rs 743.71 crore
• the company’s own admission before the Karnataka High Court that dues were overdue
• an NCLT finding that cash accruals fell short of debt obligations every month until December 2023

The court also held that the companies could not challenge Omkara’s status as assignee. The Karnataka High Court had upheld the assignment, and the Supreme Court dismissed the special leave petition on August 25, 2025, which the bench said created an issue estoppel.

Fake citations

In a closing paragraph, the bench recorded what it called an “undesirable incident” during the hearing. Omkara objected that a compilation of judgments filed for the appellants was “replete with AI generated non-existent judgments”. The court said the appellants’ advocate-on-record tried to shift the blame to the clients while claiming not to know what the compilation contained. Senior counsel then took responsibility and asked for forgiveness.

The court said it had proposed exemplary costs. It dropped them after being told that the first appellant, Deepak Raheja, had died. It made no order as to costs.

Also See: SC upholds Bombay HC ruling quashing Yes Bank’s Rs 8,415-crore AT1 bond write-down; says administrator had no power to act