07/10/2026
Fraudulent Initiation of CIRP Does Not Automatically Mandate Its Termination: Supreme Court of India
Does a conclusive finding of fraud and collusion in filing an application under Section 7, 9 or 10 of the IBC, 2016 inevitably require termination of the entire Corporate Insolvency Resolution Process (CIRP)?
In Orris Infrastructure Private Limited v. Rakesh Kumar Gupta & Ors. (2026 INSC 1070; Civil Appeal Nos. 6797–6801 of 2023), the Supreme Court examined the conflict between fraudulent initiation and the rights of stakeholders who become part of the CIRP after admission.
The Court clarified that while fraudulent initiation may justify recalling the admission order, it does not automatically require termination of the entire CIRP once third-party rights and genuine stakeholder claims have intervened.
The Supreme Court set aside the NCLAT’s termination order and laid down key principles:
• The NCLT has inherent power to recall an admission procured through fraud and must address fraudulent conduct under Section 65 of the IBC.
• Before admission, proceedings are essentially in personam. After admission, CIRP becomes an in rem collective process involving creditors, the RP and CoC.
• The CIRP may continue even after the fraudulent applicant is removed or disqualified.
• The NCLT must independently assess whether the CIRP should continue or be closed based on the facts of each case.
• Before deciding, the NCLT must hear the CoC, RP and other affected stakeholders and ensure that any continuation of CIRP meets the requirements of certainty, probity and transparency.
The key takeaway: Fraud may warrant recalling an admission, but termination of the entire CIRP is not automatic. The consequences for the corporate debtor and all stakeholders must be considered.
NC Legal | Advocates & Solicitors
