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Supreme Court Clarifies Proof of Default Under Section 7 IBC — and Flags AI-Generated Non-Existent Judgments
Case: Deepak Raheja & Anr. v. Omkara Assets Reconstruction Private Limited & Anr.
Neutral Citation: 2026 INSC 1134
Date: 15 October 2026
Bench: Justice Dipankar Datta and Justice Augustine George Masih
Area of Law: Insolvency & Bankruptcy | Section 7 IBC | Information Utility
What did the Supreme Court decide?
The Supreme Court has clarified the evidentiary threshold for establishing default when a financial creditor seeks commencement of the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016.
The Court upheld commencement of CIRP and emphasised the substantial evidentiary value of an authenticated Record of Default maintained by an Information Utility.
Default and the precise amount outstanding are different questions
A significant part of the judgment is the distinction between:
- the occurrence of default; and
- the precise amount ultimately outstanding.
A default is a historical event: a debt became due and remained unpaid.
The precise quantum can subsequently change because of interest, repayments, adjustments, appropriations and other accounting entries.
At the Section 7 admission stage, the NCLT is conducting a summary statutory inquiry into whether a financial debt and default exist. It is not expected to conduct a full forensic reconciliation of accounts before CIRP can commence.
Evidentiary value of an Information Utility record
The Court held that an authenticated Information Utility Record of Default carries a high evidentiary presumption and can, by itself, provide sufficient prima facie proof of default.
That presumption is not conceptually irrebuttable, but it cannot ordinarily be displaced by a bare denial or an unsupported accounting disagreement. Rebuttal requires clear and credible material.
Where an Information Utility record is unavailable, the financial creditor may still rely upon other legally permissible material such as loan documents, account statements, acknowledgments and correspondence.
The Court also considered the subsequent legislative development concerning Section 7 and treated it as reinforcing the role of authenticated Information Utility records rather than creating an entirely new principle.
Profitability does not disprove default
The Court rejected the argument that positive EBITDA or an otherwise viable business necessarily establishes absence of default.
A business may be commercially viable and yet fail to pay a debt when due.
The statutory inquiry under Section 7 remains whether the legally relevant default occurred.
The Court’s warning concerning AI-generated authorities
The judgment separately records a serious incident during the proceedings.
A compilation placed before the Court was objected to on the ground that it contained AI-generated, non-existent judgments. The Court strongly disapproved of the incident.
This was not the ratio of the insolvency case, but the observation carries an important professional message.
Artificial intelligence can assist legal research and drafting, but no authority should be cited or placed before a court without independent verification from an authentic legal source.
What this means for creditors and businesses
For financial creditors, properly authenticated Information Utility records can substantially simplify proof of default at the admission stage.
For corporate debtors, Information Utility authentication requests should not be treated as routine correspondence. A failure to dispute inaccurate information at the appropriate stage may later have serious evidentiary consequences.
Key takeaway
Section 7 admission is not a mini-trial of the parties’ complete accounts. The Court asks whether a financial debt and default are established on the statutory standard; exact reconciliation can follow through the insolvency claims process.
Primary source: Official Supreme Court judgment viewer.
Related JLP resources: Banking, Finance & Insolvency · Dispute Resolution & Litigation · Supreme Court Practice
Disclaimer: This legal update is intended solely for general information and discussion of recent judicial developments. It does not constitute legal advice or create an advocate-client relationship. The application of any judgment depends upon the facts and legal circumstances of the individual matter. Persons requiring advice concerning a particular dispute should obtain professional legal advice.