Insolvency against the JW Marriott Bengaluru owner upheld, in an appeal that came with AI-generated fake judgments
Justices Dipankar Datta and Augustine George Masih held an Information Utility record of default self-sufficient under Section 7 and profitability irrelevant, and recorded a compilation of non-existent precedents.
The companies that own the JW Marriott in Bengaluru and the Crowne Plaza in Pune said they were profitable. Together they reported EBITDA of about ₹91 crore in 2022-23, and they argued that two running hotels should not be pushed into insolvency. On 15 October 2026 the Supreme Court dismissed their appeals and upheld the admission of both companies into the corporate insolvency resolution process on petitions by Omkara Assets Reconstruction. Justice Augustine George Masih, writing for himself and Justice Dipankar Datta, held that profitability has no bearing on whether there has been a default under Section 7 of the Insolvency and Bankruptcy Code. A record of default issued by an Information Utility is, by itself, enough to establish one. The judgment ends with a paragraph about a compilation of judgments filed for the appellants, which the respondents said was full of AI-generated cases that do not exist.
A ₹600 crore loan, sold to an ARC
Under a loan agreement of 26 December 2017, Piramal Finance lent ₹600 crore to two co-borrowers. GSTAAD Hotels Pvt. Ltd. took a ₹450 crore term loan and a ₹50 crore rolling credit facility, and Neo Capricorn Plaza Pvt. Ltd. took a ₹100 crore term loan. GSTAAD owns and runs the JW Marriott in Bengaluru, and Neo owns and runs the Crowne Plaza in Pune.
A cash management agreement signed in January 2018 with the hotel operator, Marriott Hotels India, routed the hotels' gross revenue into a revenue account. Each day, 66 per cent went to an expense account for running costs and 34 per cent to a retention account to service the debt. A debt service reserve account of ₹8 crore was required for GSTAAD and ₹2 crore for Neo. It is undisputed that ₹3 crore of GSTAAD's reserve had not been disbursed by 15 November 2022. GSTAAD also borrowed ₹98 crore and ₹65 crore under the Government's Emergency Credit Line Guarantee Scheme, and Neo borrowed ₹19.5 crore.
The loan agreement gave the lenders an absolute right to assign the debt without the borrowers' consent. On 27 December 2022, the Piramal lenders assigned the term loan, the rolling credit facility and both emergency credit facilities to Omkara. On 9 February 2023, four records of default were registered with National E-Governance Services Ltd., the Information Utility with which the facilities were recorded. On 15 February Omkara recalled the entire debt, demanding ₹666,53,26,968 from GSTAAD within three days and ₹119,99,23,320 from Neo. On 9 March it filed Section 7 petitions against both companies, giving 15 November 2022 as the date of default and ₹665,74,77,237 as the amount in default as on 27 February 2023.
Two rounds before the tribunals, and a lost writ
The next day GSTAAD challenged the assignment in the Karnataka High Court, arguing that it breached the SARFAESI Act and RBI circulars because its account had never been classified as a non-performing asset or a special mention account. A Single Judge upheld the assignment on 28 February 2024. A Division Bench dismissed the appeal on 19 May 2024, and the Supreme Court dismissed the special leave petition on 25 August 2025. In those proceedings, both the Single Judge and the Division Bench recorded GSTAAD's own statement that it had not disputed that principal or interest was overdue, and the High Court found that its accounts were irregular.
The National Company Law Tribunal at Mumbai first admitted both petitions on 9 January 2024. The National Company Law Appellate Tribunal set those orders aside on 8 January 2025 and sent the petitions back. It asked for fresh consideration of the cash management agreement, the amounts routed through it to service the debt, the unused reserve account, whether default had been admitted, and how the emergency credit money had been used. After further pleadings, the Tribunal admitted both petitions again on 8 July 2025, and the Appellate Tribunal affirmed on 19 August 2025.
The tribunals' findings went against the companies on every point. The cash management agreement was held to be only a channel for directing a share of revenue towards the debt, not a full discharge of the obligation to repay. The ₹10,35,88,444 said to have been withdrawn beyond the 34 per cent share related to April and May 2023, outside the relevant period, and returning it would only have increased the default. On the emergency credit facilities alone, the Tribunal found unpaid interest of ₹1,38,64,767 and ₹1,14,59,589 and two missed instalments totalling ₹4,08,33,334. A chartered accountants' review commissioned by GSTAAD did not dispute how the default had been computed. It questioned only the interest rate applied.
What the Supreme Court held
The Court began with the limits of its own role. An appeal under Section 62 lies only on questions of law. Concurrent findings by both tribunals on the same material will not be disturbed unless they are perverse, rest on no evidence, ignore material evidence or apply the wrong legal test.
Omkara's standing as a financial creditor under Section 5(7) was held to be settled by the assignment, which the Karnataka High Court had upheld and the Supreme Court had left undisturbed. Any further challenge to the assignment is barred by issue estoppel.
On the nature of the inquiry, the Court held that Section 7 is a summary jurisdiction. Default is to be established on a preponderance of probabilities from the documents on record, not through a forensic reconciliation of accounts. The Court drew a distinction that answered most of the companies' arguments: a default is a fixed historical event, while the amount outstanding keeps changing. At the admission stage the Adjudicating Authority only has to find that a debt exists and that there has been a default.
The Information Utility record comes first
The most significant part of the judgment for future cases sets out how the evidence is to be weighed. Section 7(3)(a) lists the Information Utility's record of default first among the documents a financial creditor may file. Section 7(4) directs the Adjudicating Authority to ascertain default from the records of an Information Utility, or, as an alternative, on other evidence. The Court read that structure as making the Information Utility record a self-sufficient basis, not just one item in a mass of evidence. It explained that under the Information Utility regulations, a creditor has to file proof of both the debt and the default, so the record is a documented filing and not a bare assertion.
The Court described a two-tier scheme. At the first tier is the Information Utility record of default. It is sufficient on its own and carries a strong presumption, which can be displaced only by clear, cogent, credible and compelling material, not by a bare denial or a disagreement over bookkeeping. At the second tier are the other documents listed in Part V of Form 1 under the 2016 application rules, such as loan agreements, account statements, balance confirmations, acknowledgements of liability and correspondence. Taken together, these can also establish default on the summary standard that applies under Section 7.
The Court said its view was reinforced by the Insolvency and Bankruptcy Code (Amendment) Act, 2026, notified in April 2026. The amendment replaces “may” with “shall” in Section 7(5)(a), so admission is mandatory once the conditions are met. Explanation I says no other ground may then be considered for rejection. Explanation II says that where a financial institution files a record of default from an Information Utility, that record is sufficient for the Adjudicating Authority to find default.
Why profitability did not help
The companies relied on Vidarbha Industries Power Ltd. v. Axis Bank and on their profits. The Court held that profitability is legally irrelevant to whether there has been a default under Section 7, and also an unreliable economic indicator of whether a company can service its debt.
It explained the principle. The Code is designed for timely intervention, not terminal insolvency. Its aim is to deal with financial stress at the earliest point the law recognises, which is a default, and not to wait until liquidation is the only option. That is why Parliament made default under Section 3(12), and not commercial or balance-sheet insolvency, the trigger. Requiring a creditor to wait for a company's irreversible collapse before using the Code would undermine its preventive purpose and work against resolution in preference to liquidation. On the record, a default above the Section 4 threshold was established.
A compilation of judgments that did not exist
Before closing, the Court recorded what it called an undesirable incident during the hearing. The appellants had filed a compilation of judgments. The respondents objected immediately and seriously, saying it was full of AI-generated judgments that do not exist.
When questioned, the Advocate-on-Record for the appellants tried to shift all the blame onto the appellants and claimed not to know what the compilation contained. Senior counsel for the appellants then took the blame himself and asked for forgiveness on their behalf. The Court heard the appeal on merits but kept open the respondents' objection that conduct of this kind disentitled the appellants to a hearing. It had proposed to impose exemplary costs and to deal severely with the appellants.
The Court was later told that the first appellant had died. For that reason it deleted the direction for costs. It also noted that under Order XXII Rule 6 of the Code of Civil Procedure the appeal did not abate, so any application about his death or the substitution of his heirs was unnecessary and stood disposed of.
Order
Both appeals were dismissed. The Tribunal's orders of 8 July 2025 admitting CP (IB) Nos. 291 and 290 of 2023, as affirmed by the Appellate Tribunal on 19 August 2025, were upheld, and the resolution process for GSTAAD Hotels and Neo Capricorn Plaza will proceed in accordance with law. Pending applications were disposed of, with no order as to costs.