Section 58C and the Limits of the Adjudicating Authority’s Discretion in CIIRP: Speedy Resolution Not Yet on Horizon
I. INTRODUCTION
The Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Act No. 6 of 2026), notified in the Gazette on 6 April 2026, has introduced a new insolvency pathway in Indian law. Chapter IV-A, inserted by Clause 40 of the Amendment Act, establishes the Creditor-Initiated Insolvency Resolution Process (CIIRP). The framework departs from the established Corporate Insolvency Resolution Process (CIRP) under Sections 7 to 32 in three significant ways: the process is initiated administratively by the financial creditors rather than through an order of the Adjudicating Authority; the CD’s board retains management of the CD’s affairs during the process under the supervisory oversight of a resolution professional, on the debtor-in-possession (DIP) model; and the process operates within a compressed timeline of one hundred and fifty days, extendable once by forty-five days under Section 58D(2).
Because the CIIRP commences administratively rather than through an Adjudicating Authority order, the CD’s first formal opportunity to challenge the process arises only after commencement. That opportunity is governed by Section 58C of the Code. Section 58C is the CD’s gateway to challenge — its sole structured remedy under Chapter IV-A. Practitioners advising corporate debtors will encounter Section 58C in every contested CIIRP, and the choices the provision presents will shape how Indian insolvency practice develops in the months and years ahead.
This article examines Section 58C carefully, with particular attention to the limits of the Adjudicating Authority’s discretion under the provision. Section 58C(2) sets out two outcomes: declaration that the commencement of CIIRP is void ab-initio (under sub-clause (a)), and conversion of the CIIRP to CIRP (under sub-clause (b)). The first uses the discretionary “may”; the second uses the mandatory “shall”. The asymmetry is doctrinally significant and operationally consequential. It produces concerns that practitioners advising corporate debtors must understand before counselling on whether and how to invoke Section 58C, and it raises issues that the Insolvency and Bankruptcy Board of India (IBBI) may wish to consider in finalising the draft CIIRP Regulations and that the Ministry of Corporate Affairs may wish to address through executive order under Section 242(1A) of the Code, the removal-of-difficulties provision inserted by Clause 72 of the Amendment Act.
A further practical concern attends Section 58C litigation: pendency consumes time within the 150-day CIIRP timeline. The Adjudicating Authority may judicially exclude the period of pendency, and appeals to the NCLAT and the Supreme Court may compound the delay. The speedy resolution that justifies the compressed CIIRP framework is undermined regardless of how the timeline is procedurally managed. Tolling, in this sense, is a patch on a structural problem, not a cure.
The article proceeds in eight sections: the statutory framework (II); Section 58C(2)(a) and the substantive remedy of void ab-initio (III); Section 58C(2)(b) and conversion to CIRP (IV); the practitioner concerns (V); the alternative pathway under Section 60(5) (VI); regulatory safeguards (VII); and practitioner action points and conclusion (VIII).
A brief note on the constitutional dimension: the concerns identified in Section V have implications for proportionality and remedial coherence under Articles 14 and 19(1)(g) of the Constitution. The article notes these implications without developing them in detail; the detailed treatment is reserved for separate examination.
II. THE STATUTORY FRAMEWORK
A. Eligibility and Initiation Mechanics — Sections 58A and 58B
Section 58A circumscribes the CIIRP framework’s reach: CIIRP can be initiated only against such categories of corporate debtors as the Central Government may notify, and only where the corporate debtor is not undergoing insolvency resolution or liquidation and has not so undergone in the preceding three years. The class of corporate debtors eligible for CIIRP is therefore both notified and bounded by recent insolvency history.
Section 58B sets out the initiation procedure. A financial creditor can initiate CIIRP in case of default by the CD, subject to: (a) prior intimation to the CD; and (b) approval of the eligible financial creditors (the EFCs — being financial creditors of the class of financial institutions notified by the Central Government), at the threshold of fifty-one per cent in value of the debt due to such EFCs. The Central Government separately notifies the class of financial creditors who will be treated as EFCs.
The financial creditor that intends to initiate CIIRP must consider the representation made by the CD, if any, after intimation. After such consideration, if the financial creditor still intends to proceed, it must — within thirty days of receipt of the CD’s representation — approach the EFCs again for a second approval. The threshold for this second approval is also fifty-one per cent in value of the debt due to such EFCs. Section 58B(3) provides for the appointment of a resolution professional, and Section 58B(4) requires public announcement on the creditor-initiated insolvency commencement date.
B. The Text of Section 58C
Section 58C of the Code, inserted by Clause 40 of the Amendment Act, reads as follows:
58C. (1) If the CD has any objection to the commencement of the process under section 58B, it may file an application to the Adjudicating Authority within a period of thirty days from the creditor-initiated insolvency commencement date in such form and manner as may be specified, accompanied with such fee as may be prescribed.
(2) Where the Adjudicating Authority, pursuant to an application under sub-section (1) is satisfied that—
(a) a default has not occurred or both a default has not occurred and the initiation of the creditor-initiated insolvency resolution process was in contravention of section 58A or 58B, it may, by order, declare the commencement of the process to be void ab-initio;
(b) a default has occurred, however, the initiation of the creditor-initiated insolvency resolution process was in contravention of section 58A or 58B, it shall, convert the creditor-initiated insolvency resolution process to corporate insolvency resolution process and pass an order as referred to in sub-clauses (i) to (v) of sub-section (1) of section 58H.
(3) The Adjudicating Authority shall pass an order under sub-section (2), within a period of thirty days from the date of receipt of the application under sub-section (1):
Provided that if the Adjudicating Authority has not passed an order within such period, it shall record the reasons for such delay in writing.
C. The Three Pathways
Section 58C operates on two factual variables: whether a default has occurred, and whether the initiation of the CIIRP was in contravention of Section 58A or 58B. The combination of these two variables produces three pathways.
The first pathway is governed by Section 58C(2)(a). Where, upon the CD’s application, the Adjudicating Authority is satisfied either that no default has occurred, or that no default has occurred together with procedural contravention of Section 58A or 58B, the Adjudicating Authority may declare the commencement of the CIIRP to be void ab-initio. The verb is “may” — discretionary. The remedy is the strongest available under Section 58C: the CIIRP is treated as having never been commenced. Section III examines this pathway in detail.
The second pathway is governed by Section 58C(2)(b). Where, upon the CD’s application, the Adjudicating Authority is satisfied that a default has occurred but the initiation was in contravention of Section 58A or 58B, the Adjudicating Authority shall convert the CIIRP to the CIRP. The verb is “shall” — mandatory. The remedy is preservative rather than terminative: the insolvency proceeding continues, but under the procedural framework of Chapter II rather than Chapter IV-A. Section IV examines this pathway in detail, including a substantive concern about its operation in cases of Section 58A non-eligibility.
The third pathway operates by implication. Where the Adjudicating Authority finds that a default has occurred and there is no procedural contravention, the conditions for neither sub-clause (a) nor sub-clause (b) are satisfied. The CD’s application produces no remedy. The objection is dismissed, and the CIIRP continues. A fourth scenario — procedural contravention found without any finding on default — is conceivable in principle, but the structure of Section 58C(2) requires the Adjudicating Authority to form a view on default to make any order under either sub-clause.
Section 58C contemplates that any litigation under it will be concluded — at the Adjudicating Authority level — within sixty days of the CIIRP commencement: a thirty-day window for the CD to file objection application under sub-section (1), and a thirty-day window for the Adjudicating Authority to dispose it under sub-section (3).
III. SECTION 58C(2)(a) — THE SUBSTANTIVE REMEDY OF VOID AB-INITIO
Section 58C(2)(a) is the CD’s substantive remedy under Section 58C against initiation of CIIRP. It is the only pathway by which the CD can secure relief that terminates the CIIRP altogether. The Adjudicating Authority’s order under sub-clause (a) declares the commencement to be void ab-initio — treated as having never been commenced. Where the Adjudicating Authority is satisfied of the conditions in sub-clause (a), no other remedy under Section 58C is competing for application: sub-clause (b) is engaged only where default has occurred; sub-clause (a) is engaged only where it has not. The two are mutually exclusive.
Two features of sub-clause (a) deserve careful attention. The first is the disjunctive structure of its two limbs. The second is the discretionary character of the verb “may.”
A. The Disjunctive Structure of Sub-Clause (a)
Sub-clause (a) operates on the satisfaction of one of two alternative conditions:
(i) a default has not occurred [Limb 1]; or
(ii) both a default has not occurred and the initiation of the creditor-initiated insolvency resolution process was in contravention of section 58A or 58B [Limb 2].
The two limbs offer the CD different evidentiary paths to the same remedy. The remedy in either case is void ab-initio. The verb governing both is the same discretionary “may.” Limb 1 stands alone on the merits of the default question — if no default occurred, the CIIRP cannot stand regardless of procedural propriety. Limb 2 combines the no-default finding with an additional procedural finding; both are required for Limb 2 to be engaged.
If Limb 1 alone is sufficient for void ab-initio, what work does Limb 2 do? An interpretive principle of long standing in Indian statutory construction holds that no part of a statute is to be treated as redundant or surplusage. The most plausible reading is that the two limbs identify different evidentiary cases for the same remedy, and that Limb 2 captures the strongest case for void ab-initio: the CD that establishes both no-default and procedural contravention has presented the strongest possible case — the CIIRP was both substantively unjustified and procedurally defective. The two findings together support the Adjudicating Authority’s exercise of the discretionary “may” with greater confidence than Limb 1 alone. On this reading, Limb 2 is descriptive of the paradigm case rather than creating a distinct ground. The operative finding remains “no default” in both limbs.
The article adopts this reading. It is consistent with the disjunctive structure of the text, with the principle against surplusage, and with the operational reality that the Adjudicating Authority’s discretion is more readily exercised in favour of void ab-initio when the underlying record is stronger. The strategic implications of the choice between Limb 1 and Limb 2 — particularly in cases where the AA’s view on default may differ from the CD’s pleaded position — are addressed in Section V.
B. The Discretionary “May”
Sub-clause (a) uses the discretionary verb “may.” The Adjudicating Authority that finds the conditions of either Limb 1 or Limb 2 to be satisfied is empowered to declare the initiation void ab-initio but is not required to do so. The discretion is wide and is exercisable on the facts and equities of the particular case.
The choice of “may” rather than “shall” is deliberate. Where the CD has proved its case on merits, the discretionary character of the remedy permits the Adjudicating Authority to consider factors that may bear on whether void ab-initio is the appropriate response — the conduct of the parties, the timing of the CD’s application, the prejudice that void ab-initio would cause to other stakeholders, and the equitable considerations that ordinarily inform tribunal discretion.
IV. SECTION 58C(2)(b) — CONVERSION TO CIRP AS STRUCTURAL CONSEQUENCE
Section 58C(2)(b) operates where the Adjudicating Authority is satisfied that a default has occurred but the initiation of the CIIRP was in contravention of Section 58A or 58B. The Adjudicating Authority “shall” — mandatorily — convert the CIIRP to the CIRP and pass an order as referred to in sub-clauses (i) to (v) of Section 58H(1). Three features of this sub-clause warrant analysis: the mandatory character of the verb “shall,” the consequences of conversion that follow from the cross-reference to Section 58H(1), and the interaction of Section 58C(2)(b) with the other conversion pathways available under the Code.
A. The Mandatory “Shall” and the Constrained Discretion of the Adjudicating Authority
In contrast to the discretionary “may” of sub-clause (a), sub-clause (b) uses the mandatory “shall.” Where the conditions of sub-clause (b) are satisfied — default has occurred and procedural contravention is found — the Adjudicating Authority is obliged to convert. The Adjudicating Authority cannot, by exercise of discretion, decline to convert, modify the order to permit cure of the contravention, or order any alternative response. The text leaves no interpretive space for that kind of discretion.
The Adjudicating Authority’s role under sub-clause (b) is essentially declarative: it makes findings of fact on the two operative variables and applies the consequence the statute prescribes. The asymmetry with sub-clause (a) is real and operationally consequential. Where the CD’s case fits sub-clause (a), the Adjudicating Authority retains discretion to decline void ab-initio for equitable reasons. Where the case fits sub-clause (b), no comparable discretion is available.
The mandatory character of “shall” in sub-clause (b) is not unique to it. As Sub-section C examines below, the Code uses the same mandatory verb for the other two conversion pathways — Section 58H(1) and Section 58H(2). All three conversion pathways operate on mandatory “shall,” leaving the Adjudicating Authority with constrained discretion at the conversion-of-CIIRP-to-CIRP stage across the entirety of Chapter IV-A.
It bears noting that the CD’s pleading does not bind the Adjudicating Authority’s eventual finding. The text uses the phrase “is satisfied that” — directing the Adjudicating Authority to make findings on its own assessment of the materials before it. Where the CD pleads sub-clause (a) but the materials before the Adjudicating Authority establish the conditions of sub-clause (b), the Adjudicating Authority is empowered (and arguably obliged) to apply sub-clause (b). This dynamic — the Adjudicating Authority’s power to navigate between the two sub-clauses based on its own findings — has consequences for the CD’s pleading strategy that Section V examines.
B. A Substantive Concern — Conversion in Cases of Section 58A Non-Eligibility
Section 58C(2)(b) operates uniformly where default has occurred and the initiation was in contravention of either Section 58A or Section 58B. But the two contraventions are not commensurable. A contravention of Section 58B concerns the procedural conduct of the initiation — failure to obtain EFC approval at the prescribed threshold, failure to give the CD the representation opportunity, defective public announcement, and similar procedural matters. A contravention of Section 58A is structurally different: it means the corporate debtor does not fall within the class of corporate debtors that the Central Government has notified as eligible for CIIRP at all.
Where the contravention is of Section 58A, the CIIRP framework should not have been invoked against the CD in the first place. The CD is, by the Central Government’s own notification, outside the framework’s scope. To convert such a CIIRP to CIRP — visiting upon the CD the consequences of management displacement under Chapter II — is to compound the original error rather than remedy it. The CD that was wrongly subjected to CIIRP (because it was not in the notified class) is now subjected to CIRP. The wrong is the financial creditor’s; the consequence is borne by the CD.
The proportionate response to a Section 58A contravention is declaration of the initiation as void ab-initio, with costs against the financial creditor. Such a remedy reflects that the CD ought not to have been brought within the framework’s scope and should be restored to the position it would have occupied absent the wrongful initiation. The current text of Section 58C(2)(b), by mandating conversion uniformly across both Section 58A and 58B contraventions, produces a disproportionate consequence in Section 58A cases that warrants regulatory or eventual statutory attention.
C. The Consequences of Conversion — Section 58H(1)(i) to (v)
Where the Adjudicating Authority orders conversion under sub-clause (b), the consequences are those specified in sub-clauses (i) to (v) of Section 58H(1). The conversion order: (i) converts the CIIRP to the CIRP under Chapter II of the Code, with Chapter II’s provisions thereafter applying to the proceeding; (ii) determines the stage at which the converted CIRP commences, taking into account any recommendation of the committee of creditors; (iii) appoints the resolution professional from the CIIRP as the interim resolution professional or resolution professional for the CIRP, as the case may be; (iv) declares a moratorium for the purposes referred to in Section 14; and (v) provides that the costs incurred during the CIIRP shall be included as part of insolvency resolution process costs for the CIRP.
Three features of this consequence-set are practitioner-relevant. First, conversion is preservative. The insolvency proceeding does not end; it continues under Chapter II. Work performed during the CIIRP — claims verification, information memorandum preparation, identification of resolution applicants — is not lost. Second, the CD’s management is displaced. Chapter II operates on the management-displacement model under Section 17, where the interim resolution professional takes over the powers of the CD’s board. The DIP architecture that distinguished CIIRP under Section 58F does not survive conversion. Third, CIIRP costs are absorbed into CIRP costs.
A practitioner-relevant question on the conversion mechanics arises where conversion follows from Section 58H(1)(a) — non-receipt of a resolution plan within the period — or Section 58H(1)(c) — rejection of the resolution plan by the AA. From which stage does the converted CIRP proceed? The Code’s text under Section 58H(1)(ii) speaks of the AA “deciding the stage from which the CIRP shall commence, after considering any recommendation of the CoC.” The draft Regulations are largely silent on the procedural framework for this stage-determination question. The early CIIRP cases will require regulatory or judicial guidance on whether the converted CIRP commences fresh, builds on CIIRP work already completed, or is calibrated to the specific stage at which CIIRP failed.
D. The Three Conversion Pathways and Their Interaction
Conversion of the CIIRP to the CIRP is not exclusive to Section 58C(2)(b). The Code provides three conversion pathways, each with different triggers and authorities, but each operating on the same mandatory “shall”:
Section 58C(2)(b) — corporate debtor’s objection. Triggered by the CD’s application under Section 58C(1) and the Adjudicating Authority’s findings of default plus procedural contravention. Conversion is mandatory once the conditions are satisfied.
Section 58H(1) — Adjudicating Authority’s own findings. The Adjudicating Authority orders conversion where it: (a) does not receive a resolution plan within the period under Section 58D; (b) is satisfied that the CD or its personnel have failed to assist or cooperate with the resolution professional; or (c) rejects a resolution plan under Section 58J read with Section 31(2). The opening clause uses “shall” — once any prerequisite condition is satisfied, the Adjudicating Authority must convert.
Section 58H(2) — committee of creditors’ resolution. Triggered where the CoC, by sixty-six per cent vote, resolves to convert. The resolution professional applies to the Adjudicating Authority, which then passes a conversion order with the same Section 58H(1)(i) to (v) consequences. Both verbs — “shall make an application” and “shall pass an order” — are mandatory.
The uniform use of “shall” across all three pathways is structurally consequential. Once the prerequisite conditions are established under any of the three pathways, conversion follows mandatorily. The Adjudicating Authority does not have discretion to decline conversion on equitable grounds or to order alternative remedies. The differences among the pathways lie in the trigger conditions rather than in the consequences or the level of judicial discretion.
The interaction between these pathways during a pending Section 58C application is a matter of tribunal practice rather than express statutory direction. Section 58H(2) operates “at any time during the creditor-initiated insolvency resolution process period” — language that does not, on its face, exclude the period during which a Section 58C application is pending. As a matter of practice, the Adjudicating Authority is likely to dispose of the CD’s pending Section 58C application before considering a CoC-initiated conversion application under Section 58H(2).
The relevance of this for Section 58C analysis is twofold. First, the CD that contemplates a Section 58C application must consider that the CoC, once constituted, holds a parallel pathway to conversion that is independent of the CD’s pleading. Second, Section 58C(2)(b) is structurally similar to Section 58H(2) in outcome — both produce conversion to CIRP with the consequences set out in Section 58H(1)(i) to (v). The differences lie in the trigger and the prerequisite findings. This structural similarity creates the conditions that Section V examines: the possibility that Section 58C(2)(b) is invoked in circumstances where Section 58H(2) would be the procedurally appropriate pathway.
V. THE PRACTITIONER CONCERNS
Sections III and IV have set out the statutory architecture of Section 58C(2). This Section turns to the practitioner concerns arising from that architecture. The concerns are not abstract. They are the consequences that the CD, the financial creditor, the resolution professional, and the Adjudicating Authority will encounter in practice. Five concerns warrant particular attention: the pleading asymmetry between the limbs of Section 58C(2)(a); the judicial pendulum risk; the temporal-strategic dynamic; the possibility of collusive use of Section 58C(2)(b); and the procedural pathway under the Limitation Act.
A. The Pleading Asymmetry Between the Limbs of Section 58C(2)(a)
Section III has set out the doctrinal foundation: the two limbs of sub-clause (a) lead to the same remedy through different evidentiary cases. In practice, the choice between Limb 1 and Limb 2 is consequential, and the structural framework channels the CD toward an asymmetric pleading strategy.
Consider the CD that pleads Limb 1 alone — “no default has occurred” without raising procedural contravention. If the AA is satisfied of no default, void ab-initio follows. If the AA finds default has occurred, the conditions of Limb 1 are not met; the conditions of Limb 2 are also not met; the conditions of sub-clause (b) require both default and procedural contravention, which the CD has not pleaded. The application is dismissed. The CIIRP continues. The CD’s position has not worsened — it has simply not improved.
Now consider the CD that pleads Limb 2 — both no default and procedural contravention. If the AA is satisfied of both, void ab-initio follows. If the AA finds default has occurred but is satisfied of procedural contravention — the very contravention the CD itself pleaded — the conditions of sub-clause (b) are met. Conversion is mandatory. The CD’s pleading has supplied the AA with the procedural contravention finding that triggers conversion. The CD’s position has worsened materially: from continuation of CIIRP under DIP architecture to conversion to CIRP with management displacement / Creditors in Control.
The asymmetry is structural. Pleading Limb 1 alone is the safer course where the CD’s confidence in the no-default case is moderate. Pleading Limb 2 risks conversion if the no-default case fails. The CD with both a no-default argument and a procedural contravention argument — the CD with the strongest case under the framework’s own logic — is rationally channelled toward minimalist pleading: omit the procedural contravention argument unless the no-default case is overwhelming. The framework discourages the comprehensive disclosure that careful regulatory drafting would suppose.
B. The Judicial Pendulum Risk
The pleading asymmetry takes a distinctive form in tribunal practice. The Adjudicating Authority is not bound by the CD’s pleading framing. Where the materials before the Adjudicating Authority contain indications of default — whether through the financial creditor’s response, the resolution professional’s report, or information utility records — the Adjudicating Authority may form a view on default that diverges from the CD’s pleaded case. The result is a judicial pendulum: the CD’s application, framed under sub-clause (a), may swing toward sub-clause (b) on the Adjudicating Authority’s findings.
In practice, this dynamic is unlikely to manifest only in the Adjudicating Authority’s final order. Patterns observable in CIRP admission practice suggest that the bench will, in many cases, indicate its preliminary view to the CD’s counsel before formally ruling — that the bench is not persuaded of the no-default case, that the records suggest default, and that conversion may follow if the application is pressed. The CD’s counsel must then choose between withdrawal — the CIIRP continues, but at least the DIP architecture is preserved — and pressing the application, facing the risk of conversion. The CD that genuinely believed it had a substantive remedy under sub-clause (a) finds that the remedy is not safely invoked.
C. The Temporal-Strategic Dynamic
The CD’s strategic position under Section 58C is further complicated by timing. Section 58C(1) prescribes a thirty-day window from the creditor-initiated insolvency commencement date — that is, from the public announcement under Section 58B(4). The CD must receive the announcement, identify its grounds for objection, engage counsel, prepare the application, and file within thirty days. The window is short.
During the same period, the committee of creditors is being constituted. Once the CoC is in place, Section 58H(2) — the committee-of-creditors conversion pathway — becomes available. The CoC may, by sixty-six per cent vote, resolve to convert the CIIRP to the CIRP at any time thereafter. The CD that delays its Section 58C filing may find that the CoC, having reached its own conclusions, has invoked Section 58H(2) before the CD’s window has closed. The temporal positioning of the CD’s application has strategic significance that the statutory text does not make obvious.
D. The Possibility of Collusive Use of Section 58C(2)(b)
The structural similarity between Section 58C(2)(b) and Section 58H(2) — both producing conversion to CIRP with the consequences specified in Section 58H(1)(i) to (v) — gives rise to a further concern. Where the CD and the financial creditor share an interest in conversion to CIRP — perhaps because both prefer the longer and more familiar CIRP framework, or because both have come to a commercial understanding that contemplates conversion as the resolution pathway — Section 58C(2)(b) provides a route to the same outcome that Section 58H(2) would provide, but with different procedural prerequisites.
The Section 58H(2) pathway requires the CoC’s sixty-six per cent vote — a substantive threshold that records the financial creditors’ formal commercial wisdom on conversion. The Section 58C(2)(b) pathway, by contrast, is triggered by the CD’s objection and the AA’s findings of default plus procedural contravention. Where a procedural contravention exists or can be plausibly identified, the Section 58C(2)(b) pathway is available without the CoC vote that Section 58H(2) requires. The structural symmetry of outcomes, combined with the asymmetry of procedural prerequisites, creates the conditions for parties whose interests align with conversion to favour the Section 58C(2)(b) pathway over the Section 58H(2) pathway.
E. The Limitation Act and Section 58C — Condonation of Delay
Section 58C(1)’s thirty-day window is, on its face, a hard deadline. The CD that misses it appears to have lost the substantive remedy. However, the Limitation Act, 1963 applies to proceedings under the Code through Section 238A: “The provisions of the Limitation Act, 1963 shall, as far as may be, apply to the proceedings or appeals before the Adjudicating Authority…”. Section 5 of the Limitation Act provides that any application may be admitted after the prescribed period if the applicant satisfies the tribunal of sufficient cause for not making the application within such period.
The Supreme Court has confirmed that the Limitation Act applies to IBC proceedings — see B.K. Educational Services Pvt. Ltd. v. Parag Gupta & Associates (2019) 11 SCC 633 and the cases following. A CD that misses the thirty-day Section 58C(1) window may therefore file the Section 58C application together with a separate Interlocutory Application seeking condonation of delay under Section 5 of the Limitation Act, supported by sufficient cause. The Adjudicating Authority has discretion to admit the application notwithstanding the delay where sufficient cause is shown.
This procedural pathway preserves the Section 58C remedy in cases of reasonable delay — for instance, where the CD became aware of the public announcement late, where the CD was prevented by circumstances outside its control from acting within the thirty-day window, or where the CD initially explored alternatives before electing the Section 58C route. The condonation pathway is not an unlimited extension; the CD must establish sufficient cause to the AA’s satisfaction. But it is a meaningful procedural safeguard that practitioners should understand.
F. The Constitutional Dimension — Brief Note
The concerns examined in this Section have implications for proportionality and remedial coherence under Articles 14 and 19(1)(g) of the Constitution. The pleading asymmetry within Section 58C(2)(a) creates a structural disincentive to the CD’s invocation of its own remedy — and where the rational corporate debtor abstains from invoking a remedy that the statute purports to confer, the remedy may be characterised as illusory in operation. The mandatory “shall” in Section 58C(2)(b), combined with the Adjudicating Authority’s lack of discretion to direct cure of procedural defects, raises proportionality questions where the contravention found is de minimis or where the contravention is of Section 58A (non-eligibility of the CD itself). The Supreme Court’s proportionality doctrine articulated in Maneka Gandhi v. Union of India and refined through Swiss Ribbons Pvt. Ltd. v. Union of India and Innoventive Industries Ltd. v. ICICI Bank may bear on the interpretive application of Section 58C in the early CIIRP cases. These constitutional dimensions deserve detailed treatment beyond the scope of this article and are reserved for separate examination.
VI. THE SECTION 60(5) ALTERNATIVE PATHWAY
Section 58C is not the CD’s exclusive remedy in respect of the CIIRP. The Code’s general residual jurisdiction under Section 60(5) remains available, and is the appropriate pathway for grievances that fall outside Section 58C’s narrow scope. The two grievances most commonly relevant are: first, that the financial creditor’s invocation of CIIRP is in substance for recovery of dues rather than for the resolution objective the Code contemplates; and second, that there are circumstances arising during the CIIRP — in the conduct of the resolution professional, the operation of the moratorium, or the dynamics of the committee of creditors — that warrant the Adjudicating Authority’s intervention but do not fit within Section 58C’s pleading framework.
Section 60(5) of the Code, as currently in force, confers on the Adjudicating Authority broad jurisdiction:
Notwithstanding anything to the contrary contained in any other law for the time being in force, the National Company Law Tribunal shall have jurisdiction to entertain or dispose of— (a) any application or proceeding by or against the corporate debtor or corporate person; (b) any claim made by or against the corporate debtor or corporate person… ; (c) any question of priorities or any question of law or facts, arising out of or in relation to the insolvency resolution or liquidation proceedings of the corporate debtor or corporate person under this Code.
The Supreme Court has interpreted Section 60(5)(c) broadly. In Embassy Property Developments Pvt. Ltd. v. State of Karnataka (2020) 13 SCC 308 and Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (2021) 7 SCC 209, the Court confirmed that Section 60(5) confers wide residual jurisdiction over questions arising in insolvency resolution. The recovery-misuse concern — whether the IBC framework is being invoked for purposes outside its resolution objective — is precisely the kind of question that Section 60(5)(c) contemplates. Section 58C of the Code does not contain language of supersession; it does not provide that Section 58C is the exclusive remedy for the CD or that Section 60(5) is displaced in CIIRP cases. The two pathways co-exist.
Practitioners should not, however, treat Section 60(5) as a guaranteed pathway. NCLT’s response to a CIIRP-related Section 60(5) application is likely to be variable in early CIIRP cases. Some benches may treat Section 60(5) jurisdiction as genuinely available and hear the application on its merits. Other benches may treat Section 58C as the specific provision that channels the CD’s CIIRP-related grievance and decline to entertain the Section 60(5) application on the basis that the specific provision displaces the general jurisdiction by implication. The variability is bench-dependent.
Two practitioner observations follow. First, the Section 60(5) pathway is most useful where the CD’s grievance genuinely cannot be accommodated within Section 58C’s frame — that is, where the grievance is not about default or procedural contravention of Sections 58A or 58B, but about the broader purpose of the financial creditor’s invocation. Second, the recovery-misuse argument is doctrinally weaker in the CIIRP context than in the CIRP context. The 2026 Amendment Act’s tightening of Section 7 — particularly Explanation II to substituted Section 7(5) treating information utility records as sufficient evidence of default — has narrowed the recovery-misuse argument in CIRP. The CIIRP framework, with its compressed timeline and tighter eligibility under Section 58A, narrows it further.
VII. THE THREE-TIER REGULATORY RESPONSE
The structural concerns identified in Section V are not all of a single character. Some are operational and can be addressed through procedural regulation. Others are structural and require modification of how the statutory framework operates. Still others may, in time, warrant amendment of the statutory text itself. The Code, as amended, provides three regulatory tiers through which these concerns can be addressed at different levels of intervention.
A. Tier 1 — IBBI Regulatory Response Under Sections 240 and 196(1)(sa)
IBBI’s regulatory authority under Section 240 of the Code, supplemented by the new authority to specify standards of conduct for the committee of creditors under Section 196(1)(sa) (inserted by Clause 59(d) of the Amendment Act), provides the most direct and immediate response. Three specific safeguards are proposed within this tier.
First, the de minimis principle. Draft Regulation 12 should provide interpretive guidance that procedural irregularities not materially affecting the rights of any party should not be characterised as “contravention” within the meaning of Section 58C(2)(b). Material contravention — failure of the applicant’s eligibility under Section 58A, failure of the fifty-one per cent threshold, denial of the CD’s representation opportunity, defective public announcement — is the appropriate trigger for mandatory conversion. Trivial procedural deviations not affecting any party’s substantive position should be recorded as such, without being characterised as contraventions. This interpretive guidance does not override the statutory “shall”; it operationalises the underlying concept of “contravention” in a manner that preserves proportionality.
Second, the procedural framework for Section 58C hearings. Draft Regulation 12 should provide that, where the Adjudicating Authority is considering an application under Section 58C(1), the Adjudicating Authority shall: (i) put the parties on notice of the findings the Adjudicating Authority is contemplating, including any finding under sub-clause (b) where the CD has pleaded only sub-clause (a); (ii) afford the CD and the financial creditor an opportunity to address such findings; and (iii) record reasons for any departure from the CD’s pleaded framing. This procedural framework operationalises the audi alteram partem principle and reduces the risk that the judicial pendulum operates without adequate procedural fairness.
Third, CoC conduct standards under Section 196(1)(sa). The new authority empowers IBBI to specify standards of conduct for the CoC and timelines for its decisions. Standards relevant to the concerns identified include: requiring the CoC to record reasoned grounds for any Section 58H(2) conversion resolution; requiring the CoC to consider, before resolving on Section 58H(2) conversion, whether the procedural concerns underlying the proposal could be addressed through cure or whether they truly warrant conversion; and timelines that prevent strategic deferral of CoC decisions. These standards do not override the CoC’s commercial wisdom but discipline its exercise.
These three safeguards within Tier 1 are within IBBI’s existing regulatory authority. They can be incorporated in the final CIIRP Regulations, expected to follow the close of public comments on the Discussion Paper. The author’s submission to IBBI on the draft CIIRP Regulations sets out related recommendations in fuller detail.
B. Tier 2 — Central Government Executive Order Under Section 242(1A)
Section 242(1A) of the Code, inserted by Clause 72 of the Amendment Act, empowers the Central Government — through the Ministry of Corporate Affairs — to make provisions for removing difficulties in giving effect to the Code, by an order published in the Official Gazette, within five years from the Amendment Act’s commencement. The provision requires that any such order be “not inconsistent with the provisions of this Code.” This pathway is broader in scope than IBBI regulation but narrower than Parliamentary amendment, and is well-suited to addressing structural difficulties that emerge in early implementation.
Two structural concerns identified in Section V fall within this pathway. The first is the pleading asymmetry within Section 58C(2)(a). The Central Government may, by order under Section 242(1A), provide interpretive guidance that the procedural contravention finding under Section 58C(2)(b) requires a finding distinct from the CD’s own pleading — that is, the Adjudicating Authority should be guided to make the procedural contravention finding independently, rather than treating the CD’s pleading as supplying the finding.
The second concern within this pathway is the relationship between Section 58C(2)(b) and Section 58H(2). The Central Government may, by order under Section 242(1A), provide that where the conditions for both Section 58C(2)(b) and Section 58H(2) are present in the same proceeding, the Adjudicating Authority should consider whether the Section 58H(2) pathway — with its CoC vote requirement — is the procedurally appropriate route. Such guidance would help close the structural pathway for collusive use of Section 58C(2)(b) without overriding the statutory provisions.
C. Tier 3 — Long-Term Statutory Consideration
The third tier — Parliamentary amendment of the statutory text — is reserved for considerations that fall outside the scope of regulatory and executive action. The structural choices reflected in Section 58C(2)’s mandatory “shall” and the disjunctive structure of sub-clause (a)’s two limbs are statutory choices that only Parliament can revisit. Whether the eventual evidence from the operation of CIIRP supports such revisitation is a question for Parliament in due course, informed by the practical experience of early CIIRP cases. The detailed examination of the constitutional and statutory dimensions that may, in time, warrant Parliamentary attention is reserved for separate examination.
VIII. CONCLUSION
Section 58C of the Code, as inserted by the IBC (Amendment) Act, 2026, presents the corporate debtor with a structurally sophisticated remedial framework. Three pathways operate on two factual variables, with discretionary and mandatory verbs differently calibrated to the gravity of the defect identified. The framework, on its face, is well-considered legislative design.
Yet the framework’s structural features produce concerns that practitioners and regulators must confront. The disjunctive structure of Section 58C(2)(a) creates a pleading asymmetry that channels the CD toward minimalist disclosure. The Adjudicating Authority’s power to navigate between the two sub-clauses on its own findings produces a judicial pendulum risk that, in the routine exercise of tribunal case management, may operationalise mandatory conversion in cases the CD would have wished to avoid. The structural similarity between Section 58C(2)(b) and Section 58H(2) opens a back-door pathway that parties whose interests align with conversion may favour over the procedurally appropriate route. The thirty-day window for the CD’s application against the parallel availability of CoC-initiated conversion under Section 58H(2) creates a temporal-strategic dynamic that the statutory text does not make obvious. Mandatory conversion under Section 58C(2)(b) for contraventions of Section 58A — where the CD does not even fall within the CIIRP framework’s notified scope — produces a disproportionate consequence that warrants regulatory or statutory attention. The litigation that Section 58C will inevitably generate may consume time within the CIIRP’s compressed framework, undermining the speedy resolution that the framework’s compression was designed to deliver.
These concerns admit of regulatory response. The three-tier framework examined in Section VII offers a graduated set of interventions: IBBI regulatory action under Sections 240 and 196(1)(sa) for the operational concerns; Central Government executive order under Section 242(1A) for the structural concerns; and eventual Parliamentary attention for the deeper architectural questions. Each tier serves its proper scope. Together, they offer the framework that the Code’s text alone does not.
Practitioner Action Points
For corporate debtors and their counsel, the analysis suggests the following action points. First, consider the choice between the limbs of Section 58C(2)(a) carefully before pleading. Where the no-default case is moderate rather than overwhelming, pleading Limb 1 alone is the safer strategic course. Second, where the grievance is recovery-misuse rather than no-default, consider Section 60(5) as the appropriate forum, while recognising the bench-dependent variability in NCLT’s response. Third, file early within the thirty-day window to avoid being overtaken by CoC-initiated conversion under Section 58H(2). Fourth, if the thirty-day window is missed, the Section 58C application can be filed with a separate Interlocutory Application seeking condonation of delay under Section 5 of the Limitation Act, supported by sufficient cause — the Limitation Act applies to proceedings under the Code through Section 238A. For financial creditors, the analysis underscores that procedural rigour at commencement is no longer optional — Sections 58A and 58B compliance documentation is the financial creditor’s protection against Section 58C invocation. For resolution professionals, the Section 58E confirmation that the financial creditor meets the requirements of Sections 58A and 58B is now of heightened practical significance. For the Adjudicating Authority, the early CIIRP cases will set patterns; the structural concerns identified in this article warrant the procedural fairness measures that careful regulatory drafting would suppose.
Looking Forward
The promise of CIIRP is speed — resolution within one hundred and fifty days through a creditor-driven, debtor-in-possession framework that avoids the displacement and procedural friction of CIRP. The promise depends on Section 58C and the surrounding architecture operating cleanly. Where Section 58C generates litigation that consumes time the framework cannot afford, where the litigation produces outcomes neither party intended, where regulatory uncertainty prevents practitioners from advising with confidence, the promise of speed is undermined regardless of how the timeline is procedurally managed. The structural concerns identified in this article are not, in themselves, fatal to the framework. But they are concerns that deserve regulatory attention before the early CIIRP cases reach the Adjudicating Authority. The Insolvency and Bankruptcy Board of India’s final CIIRP Regulations and the Ministry of Corporate Affairs’ executive guidance under Section 242(1A) offer the means by which the framework’s promise can be more closely matched by its operation.
Speedy resolution is the framework’s animating commitment. Whether that commitment is honoured in practice will depend on the choices that the regulators, the tribunals, and the practitioners make in the months ahead. The structural framework is in place. The operational framework remains to be built.
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Author: By Prakash K. Pandya | Advocate, Insolvency Professional & Accredited Mediator | Chamber of Prakash K. Pandya, Borivali West, Mumbai
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