How Can You Protect Your Company When DRT, SARFAESI and IBC/NCLT Proceedings Overlap?
Where a bank recovery gets suddenly entangled in a Section 7 or Section 9 insolvency petition before the NCLT, the stakes are much higher for the company. When DRT, SARFAESI and IBC proceedings start running in parallel, the question is no longer just “Will the bank get its money back?” Instead, it becomes a contest between which proceeding should go forward, what remedies are left open and how should the corporate debtor fight back?
For businesses and their owners, promoters or directors in Delhi NCR, Noida, Ghaziabad, Gurugram, Mumbai, Bengaluru or anywhere else in India’s commercial hubs, timing is everything. The fact that a DRT matter is pending is no bar to an application under IBC. But similarly, an IBC petition should not be treated as just another routine recovery application.
Defending against IBC overlap requires analysing the respective proceedings, the nature of the underlying debt, requirements to initiate CIRP under the statute, the stage of DRT/SARFAESI proceedings, applicability of moratorium etc. and most importantly if the insolvency process is being used for its intended statutory purpose.
On April 20,26, the Supreme Court delivered a significant verdict which is very much on point. In Anjani Technoplast Ltd. v. Shubh Gautam, the Court rightly held that IBC process could not be used to circumvent the execution of a money decree or as a recovery tool where the bona of the insolvency process was being abused.
However, this does not open floodgates for every debtor to resist an IBC petition by claiming “recovery pressure”. Each such defence needs to be judged on its own merits and built around the statute and facts.
Why Does IBC and DRT Cross-Over Matter in India in 2026?
A bank can exercise its rights to recover under DRT proceedings, SARFAESI actions or through an insolvency application under IBC, depending on the facts of the case. Each of these routes follow different statutes.
If a company already has a pending DRT Original Application or SARFAESI possession notice/auctioneers dispute, a parallel application under the IBC can result in significant commercial pressure being applied. After admission of CIRP, operations against the corporate debtor including enforcement of security interests, in respect of subject matters covered under the Code will be stayed by virtue of the statutory moratorium under Section 14.
In Indian Overseas Bank v. RCM Infrastructure Ltd., Supreme Court held that a bank cannot go ahead with SARFAESI enforcement over property belonging to the corporate debtor in the manner contemplated in the case, once the CIRP has been initiated and the automatic moratorium under Section 14 became effective.
Indian Kanoon
The lesson for corporates is straight forward – DRT, SARFAESI and IBC proceedings must be looked at holistically, rather than in silos.
Seek a legal opinion from BK Singh Advocate, DRT Advocates to understand what proceedings are pending against you, at what stage each proceeding is and whether your intended defence actually has statutory merit.
- IBC is meant to be an insolvency- resolution regime and not a traditional money- recovery process.
- The existence of pending DRT/SARFAESI proceeding does not ipso facto prohibit every application under IBC.
- Section 238 confers overriding effect to IBC in case of inconsistency with other law.
- Section 14 imposes moratorium upon admission of CIRP, subject to statutory provisions and exemptions.
- Section 60(5) confers jurisdiction on NCLT to determine any dispute or derive any question arising out of or in connection with insolvency resolution or liquidation process.
- Section 65 penalises fraudulent/malicious initiation of insolvency proceedings.
- The proper defence depends heavily on facts i.e., the nature of debt, documents, forum, stage of procedure etc.
What Is an IBC/NCLT Cross-Over Defence?
An IBC/NCLT cross-over defence is a case-specific legal response where insolvency proceedings intersect with DRT, SARFAESI, civil recovery, execution or other proceedings involving the same corporate debtor.
The objective is not to obstruct a lawful insolvency process. Instead, the focus is on testing whether the IBC application satisfies the Code, whether the alleged debt and default meet the statutory requirements, whether the applicant has established the necessary relationship and documents, and whether the proceeding is being pursued for a purpose consistent with the IBC.
That distinction matters.
The Supreme Court's 2026 decision in Anjani Technoplast emphasised that insolvency jurisdiction should not be converted into a mechanism for enforcing a money decree or coercing payment where the circumstances show misuse of the Code. The Court also referred to Section 65 as a statutory safeguard against fraudulent or malicious initiation for purposes other than resolution of insolvency or liquidation. Sci API
For DRT Advocates, this distinction is central to preparing a responsible defence for a corporate debtor.
What Legal Framework Applies?
The major statutes are Insolvency and Bankruptcy Code, 2016, which shall be read with the rules and regulations made thereunder.
Section 7: Application by Financial Creditor
The financial creditor initiates CIRP under Section 7 subject to fulfillment of statutory conditions. Therefore, defense can analyze whether the claim in made for a financial debt, there is proof of disbursement, default, limitation etc., scrutiny of the documents relied upon and other such statutory requirements are satisfied.
Defense is not limited to saying that a proceeding before DRT is already pending.
Section 9: Application by Operational Creditor
An application by an operational creditor follows a separate statutory process. Whether a genuine pre-existing dispute exists and whether the formalities for operational debt are complied with can become critical depending on the facts.
Section 14: Moratorium
Moratorium which is attracted on admission of CIRP becomes critical. In RCM Infrastructure, the Supreme Court ruled that on initiation of CIRP and moratorium being imposed, the bank cannot proceed with the relevant SARFAESI proceeding against the corporate debtor.
Section 60(5): Jurisdiction of NCLT
Section 60(5) confers jurisdiction on NCLT to entertain any application or proceed with proceedings, claims and to adjudicate upon any question of law or fact arising out of or in relation to insolvency resolution or liquidation process.
The jurisdiction is wide, but NCLT is not substituted automatically for every other court or statutory body. The Law as affirmed by Supreme Court also in Embassy Property Developments, requires a factual nexus between the dispute and the insolvency process.
Section 238: Effect of IBC
Section 238 states that IBC shall have effect notwithstanding anything inconsistent in any other law. Supreme Court has upheld this dominant effect of IBC in Innoventive Industries Ltd. vs ICICI Bank.
However, Section 238 is not interpreted to mean that “NCLT has jurisdiction in everything”. Drafters of section 238 intended for there to be inconsistency and a statutory connection.
Section 65: Initiation of proceedings maliciously or fraudulently
Section 65 talks about initiation of insolvency proceedings fraudulently or maliciously or for any other purpose than those mentioned in the IBC. This provision has been interpreted by Supreme Court to be a safeguard against abusing the insolvency process.
Any allegation under Section 65 has to be made diligently and pleaded with facts. The existence of a dispute on recovery does not in itself mean that the insolvency was initiated maliciously.
How Should a Company Defend an IBC Petition Alongside DRT or SARFAESI?
Create one consolidated procedural map.
Enumerate all the proceedings: DRT Original Application, SARFAESI demand notice, possession notice, auction notice, securitisation application, civil suit or execution proceeding, arbitration, Section 7 or Section 9 IBC petition and appeal before NCLAT or DRAT.
Cross check the underlying debt and documents.
Crafting defenses on the points whether the debt is of the nature claimed, proof of default, limitation, maintainability, statutory requirements were complied with, the amount is under dispute or show cause documents/records contradict each other or what is the real object of IBC application. Etc. Specific defenses will differ from case to case.
One pending proceeding does not necessarily defeat the other. Recent NCLT judgments have also held that DRT/SARFAESI proceedings and IBC proceedings are based on different statutes and the mere fact that one is pending cannot by itself bar the filing of the other. IBBI
This is why BK Singh Advocate, DRT Advocates would always analyze the entire litigation history to suggest you whether to fight the admission, apply for appropriate relief before NCLT, settle or appeal an order before NCLAT.
What Documents Should Be Collected?
Before replying to an IBC petition, ensure that you have preserved the entire record. Do not depend on the latest notice sent by the bank.
The following documents can help you:
- Loan documents and sanction letter
- Account statements
- Documents related to securities and mortgages
- Pleadings and orders from DRT
- Demand notice under SARFAESI, possession notices and auction notices under SARFAESI.
- Reply sent to bank.
- ETO/Restructuring related correspondence.
- Balance sheets and Profit & Loss statements.
- Record of payments and bank statements.
- Any correspondence where you have denied the debt or amount claimed.
- Copy of IBC petition and affidavits along with it.
- Evidence related to the date of default alleged by the bank.
- Orders from any court/DRT/DRAT/NCLT/NCLAT already passed.
- Company records related to the transaction such as Board Minutes, etc.
Note down the chronology. Dates speak volumes. Often the alleged default date, date of demand, date of recovery action and date of insolvency petition do not match up.
When Should a Company Consult a Lawyer?
You should seek legal counsel before your NCLT admission hearing date, not after CIRP has changed the position of the company. When you receive a notice of insolvency after a SARFAESI action is underway, after the bank has already approached DRT, before an auction date is fixed, after a settlement discussion has taken place, or if the company denies the alleged default, time is of the essence. If the company feels the petition was mostly filed to pressure them into recovery, it should also move quickly. The recent 2026 Anjani Technoplast judgment, makes that situation relevant, though the outcome reached by the Court was based on the facts of the case. Sci Lawyers are adept at reviewing documents, handling proceedings in DRT, fighting SARFAESI cases and navigating NCLT/ NCLAT insolvency issues while managing the bigger picture litigation strategy.
How Can BK Singh Advocate and DRT Advocates Help?
BK Singh Advocate, practicing law under DRT Advocates, deals with banking, debt-recovery and tribunal matters where multiple proceedings are often pending.
This work involves reviewing the IBC petition, verifying the alleged indebtedness (financial or operational), examining DRT and SARFAESI histories, identifying procedural hurdles, drafting replies and supporting documents, and advising on the remedies available before the relevant forum.
Early case assessment can also help corporate entities located in Delhi NCR, Delhi, Noida, Greater Noida, Ghaziabad, Gurugram, Faridabad, Meerut and other business hubs avoid taking inconsistent positions in different proceedings.
BK Singh Advocate can assess the legal landscape before your company agrees to settle, where commercially appropriate. Often settlement agreements are verbal – “we promise to withdraw the case.” Your company may find that such comfort doesn’t carry the weight it deserves. If settlement is required, insist on a written agreement.
At DRT Advocates, we do not guarantee a specific outcome at NCLT or DRT. We do our best to know every aspect of the file and present legally tenable objections / remedies before the relevant forum.
Frequently Asked Questions
1. What is IBC/ NCLT cross- over defence?
An IBC/ NCLT cross-over defence can be mounted when the insolvency proceeding before NCLT (International Business Law) clashes with DRT /SARFAESI / civil recovery or similar proceedings. The defence strategy involves analysis of compliance with various statutory conditions as to debt, default, documents, forum and objective of the insolvency proceeding.
2. Can a pending DRT case stop an IBC petition from being admitted?
No, not necessarily. DRT proceedings are subject to RBI & Debt Recovery Act, 1993, whereas IBC proceedings are subject to the Insolvency and Bankruptcy Code, 2016. A DRT case pending before the Court cannot single-handedly defeat an otherwise valid and qualifying IBC application.
3. Can the bank still approach NCLT after filing a DRT case?
Not necessarily. Subject to fulfilling the conditions under IBC, a creditor may have multiple statutory remedies in connection with a loan. Each IBC application would need to be examined on facts to determine if it is maintainable under the statute.
4. Does Section 238 automatically override DRT proceedings?
No. Section 238 of IBC only confers that the Code would have overriding effect in case of any inconsistency with another law. The operation of Section 238 needs to be assessed in light of the subject proceeding as well as the stage of the case.
5. What happens to SARFAESI proceedings after initiation of CIRP?
Section 14 prohibits any action against the corporate debtor during moratorium. The recent judgment of Supreme Court in Indian Overseas Bank v. RCM Infrastructure, interpreting the effect of moratorium under Section 14 in relation to SARFAESI enforcement action, is highly significant on this issue. Indian Kanoon
6. Can DRT proceedings continue after IBC admission?
It depends on the nature of the continuing proceeding and application of provisions such as moratorium under Section 14. Generally speaking, any enforcement of liability against the corporate debtor is barred after admission of IBC application.
7. Can an IBC petition be challenged on the ground that it is a recovery proceeding?
Yes, if the facts support that the invocation of the Code was done for achieving a purpose which is not insolvency resolution. Especially, the recent Supreme Court judgment in 20 judge bench judgment in 2026 Anjani Technoplast matters is extremely relevant to raise this defence. Live Law
8. Is every IBC petition filed with recovery intent abusive?
No. Insolvency proceeding can incidentally lead to recovery of money claimed by creditors which is part of the intended objective of resolution. However, the correctness of invoking IBC would depend on facts satisfying the conditions under the statute and whether the objective is insolvency resolution.
9. What is Section 65 IBC?
Section 65 addresses fraudulent initiation of insolvency or liquidation proceedings against a person for any purpose other than the two permitted objects of resolution and liquidation respectively. Sci API
10. Can we invoke Section 65 IBC in every disputed debt situation?
No. Dispute in liability or recovery is not conclusive proof of initiation of proceedings with intent to settle personal vengeance or for any other unlawful purpose. Legal facts and evidence need to be examined carefully to make an allegation under Section 65.
11. Can NCLT adjudicate on every dispute in which a corporate debtor is involved?
No. While Section 60(5) is cast in wide terms, NCLT's jurisdiction is still limited to the matters which arise out of or in connection with insolvency resolution or liquidation. Just because a dispute involves a corporate debtor, other statutorily assigned forums have jurisdiction over those disputes.
12. Can a company defend itself against a Section 7 application?
Yes. Every defence which is legally available to a corporate debtor can be made against an application under IBC. Merely making an allegation of abuse of process without addressing statutory conditions and pointing towards evidential support will not succeed.
13. What should a company do if it has already received a SARFAESI notice of possession?
Typically, the receipt of a notice of possession would require a quick review of the legal position along with any IBC petition filed by the bank (if at all). Remedies available and impact of subsequent CIRP would depend upon the facts and stage of SARFAESI proceedings.
14. Does a negotiation or settlement talk between parties stall an IBC proceeding?
No. Negotiations or settlement talks are not considered a legal bar to continuation of any proceeding unless the terms of negotiation or settlement expressly provide for same with a legally enforceable order.
15. Can a company approach for settlement after an IBC proceeding has been initiated against it?
Technically, yes. Subject to the provisions of IBC, stage of proceedings and subject orders, parties can still settle their disputes. Any commercial settlement reached should be properly documented and distinguished from legal closure of the matter.
16. What are the key documents required for defending an IBC proceeding?
Loan documents, statements of account, records of default, notices and proof of payment / settlement, pleadings and orders in DRT/SARFAESI proceedings along with the IBC petition are usually the key documents. Exact documents would vary depending on the factual matrix.
17. Does the recent Supreme Court judgment stall creditors from initiating IBC proceedings?
No. The recent judgment merely makes it clear that IBC is not a substitute to the normal recovery or execution proceedings available to creditors. The decision does not prohibit use of IBC remedy but instructs courts to see if IBC is being misused, in facts that establish the same.
18. Can a DRT lawyer handle an NCLT matter?
Every lawyer cannot handle every matter. Experience with the forum and subject matter is critical while choosing a lawyer. For crossover dispute, a lawyer experienced with both recovery side proceeding and insolvency law would be helpful.
19. Should we wait until we get notice from NCLT to start working on the matter legally?
No. Such waiting would only lead to unnecessary risk. If the company knows that the creditor is likely to file an IBC petition, it should begin preserving documents and learn about legal options available as soon as possible, especially when there are ongoing DRT/SARFAESI proceedings.
20. How can DRT Advocates assist you with respect to IBC/NCLT defence?
DRT Advocates can analyse the insolvency petition filed under IBC along with recovery proceedings, validate the debt and default history, identify legal objections that can be sustained by courts and advise on suitable course of action or settlement.
Final Thoughts
IBC/NCLT cross- over cases cannot be decided by merely quoting one provision. Timeline, documents, nature of debt, stage and objective of the proceeding need to be read conjunctively.
Filing of DRT proceedings cannot defeat an IBC application in all cases. Similarly, an IBC petition cannot be treated at par with some other recovery notice. The Apex Court in Anjani Technoplast vs ICICI Bank (NBFC) AIR 2026 SC 1335 has laid down the importance to differentiate between bona fide insolvency resolution process and using insolvency forum as tool for recovery. Sci API
If multiple DRT/SARFAESI and NCLAT proceedings are being initiated against your company, reviewing at the earliest will help you get a clearer idea about your legal position. Advocate BK Singh, DRT Advocates can go through the record available and guide you the best course of action that can be adopted in light of the facts.
Make sure you not submit a boiler plate defence when there is an insolvency admission hearing scheduled against the company. Defence has to be based on documents, appropriate to the forum and legally tenable.
Author Bio
DRT Advocates is an Indian Law practice specializing in banking litigation, Debt recovery tribunal (India) (DRT), SARFAESI and related NCLT/NCLAT cases. We guide individuals, promoters, companies and businesses involved in recovery proceedings, insolvency matters, secured-creditor issues and concurrent tribunal matters. Whether it's a crossover matter for IBC/NCLT our lawyer BK Singh analyzes the dispute starting from the underlying documents, debt history, procedural background and relevant statute. Practical legal advice is offered at DRT Advocates with emphasis on understanding the difference between recovery processes, insolvency resolution, settlements and appellate relief.
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