IBC Being Misused, Companies' Assets Undervalued & Sold To Family Or Friends : CJI Surya Kant

During the hearing of the ADAG Bank Fraud Case, the Chief Justice of India expressed serious concerns over the increasing instances of misuse of the IBC process by bankrupt companies. The CJI flagged the issue of companies auctioning their assets to family members/ friends at undervalued rates. A bench comprising Chief Justice of India Surya Kant and Justices Joymalya Bagchi and Vipul Pancholi was hearing a Public Interest Litigation filed by EAS Sarma, former Union Government Secretary, seeking a Court-monitored investigation into the matter.The plea seeks a probe into bank collusions in the alleged bank loan fraud of over Rs 40,000 crores by Anil Dhirubhai Ambani Group (ADAG) companies.During the hearing, Advocate Prashant Bhushan for the petitioners submitted that Reliance Communications and Reliance Infra had 47,000 crores of outstanding dues, and in Bankruptcy, the company was sold for Rs. 455 crores. He stressed that it was just "1% of the total outstanding amount, and it was sold out to whom? to the brother's company." Sr Advocate Mukul Rohatgi, appearing for Anil Ambani, mentioned that the resolution of the companies under the IBC is still pending. Noting the gravity of instances where the IBC procedure is being misused, the CJI remarked : "Unfortunately, the IBC platform is now being misused like anything, you get the company's all assets undervalued, then you indulge in a kind of an auction, which is also a completely pre-planned game, somebody from the family or the close friends comes and buys it." Agreeing to the same, the SG replied, "The Government of India is also seriously considering this issue in the IBC. I cannot say much, I am a part of the discussion, but it is under very serious consideration." The CJI added that such instances are being seen routinely before the Supreme Court. He added that under the present regime, companies facing insolvency are able to undervalue their assets and even sell them to known persons/ family members. " Voluntary declarations by the companies (of Bankruptcy), then your own people evaluate you, the evaluation is not even 10% of the actual market value, and then you eventually find out this....everyday Iam observing." The Court also criticised the Central Bureau of Investigation (CBI) for registering only a single FIR with respect to the complaints received from various banks. The Court noted that one FIR was registered in 2025 on the basis of a complaint from the State Bank of India, and the subsequent complaints from other banks and financial institutions are also being investigated by enlarging the scope of the first FIR. The Court commented that the "said approach adopted by the CBI does not seem to be in conformity with the procedural law" as each complaint is a separate transaction, warranting a separate FIR.Subsequently, the bench directed the CBI to investigate the possibility of collusion on the part of bank officers as well.Case : EAS Sarma v. Union of India and others |W.P.(C) No. 1217/2025

IBC Being Misused, Companies' Assets Undervalued & Sold To Family Or Friends : CJI Surya Kant

Anmol Kaur Bawa

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