NCLAT Clarifies Limits of Section 238 IBC: Override Applies Only in Case of Direct Inconsistency
By Communication Committee Posted On : April 24, 2026
The NCLAT in Sri Vibu Venkatsubramanian v. State Bank of India & Anr. Ujaas Energy Ltd. v. West Bengal Power Development Corporation Ltd., has clarified the scope and application of Section 238 of the Insolvency and Bankruptcy Code (IBC), reaffirming its overriding effect over inconsistent provisions of other laws. The case dealt with the interplay between proceedings under the IBC and actions initiated by secured creditors under other statutory frameworks. The Court held that the non-obstante clause under Section 238 can be invoked only where there is a clear inconsistency between the IBC and another law in relation to the same subject matter. It emphasized that not all parallel or independent statutory actions are automatically overridden by the IBC, unless they directly conflict with the insolvency resolution process. Clarifying the limits of Section 238, the Court observed that proceedings which are not intrinsically linked to the resolution of insolvency or recovery of dues under the IBC framework may continue independently. It cautioned against an overbroad interpretation of Section 238 that would unnecessarily invalidate actions under other valid statutory regimes. The judgment further reinforces that the IBC is not intended to be a blanket bar against all proceedings involving the corporate debtor, but operates to override only those laws that impede or are inconsistent with the objectives of the insolvency process. Overall, the ruling brings greater clarity to the application of Section 238, ensuring a balanced approach between the supremacy of the IBC and the continued operation of other statutory mechanisms, while preventing misuse of the non-obstante clause to stall legitimate proceedings.