BluSmart, India’s first all-electric cab service, revolutionized the ride-hailing industry through its commitment to sustainability and zero-emission transport. Founded in 2019 by Anmol Singh Jaggi, Puneet Singh Jaggi, and Punit K. Goyal, the company quickly expanded across Delhi-NCR, Mumbai, and Bengaluru, becoming a pioneer in the EV fleet ecosystem. However, in April 2025, BluSmart’s financial downfall made headlines as the company faced insolvency proceedings before the National Company Law Tribunal (NCLT), Ahmedabad. The petition was filed by Catalyst Trusteeship Limited over unpaid dues of ₹1.28 crore, triggering the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code, 2016 (IBC). This case has become a significant example of how startups must align their financial and governance frameworks with the provisions of IBC to ensure sustainable operations and investor confidence.
BluSmart’s insolvency traces back to the issuance of fifteen Non-Convertible Debentures (NCDs) worth ₹1.28 crore to Catalyst Trusteeship Limited in April 2023 for the purchase and maintenance of EVs. The company defaulted on its repayments due in March and April 2025, leading Catalyst to file for insolvency under Section 7 of the IBC. BluSmart argued that the default was a temporary financial difficulty, but NCLT rejected this claim after examining its bank statements, thereby initiating CIRP and appointing NPV Insolvency Professionals Pvt. Ltd. as the Interim Resolution Professional (IRP).
Despite the company’s efforts to frame the issue as a commercial dispute, the tribunal found sufficient grounds of default and began the insolvency resolution process, giving BluSmart a maximum of 330 days to submit a resolution plan before liquidation proceedings could begin. The BluSmart case exemplifies how even minor cash flow disruptions can trigger insolvency when creditor protection frameworks are rigidly applied.
Overview of the Insolvency and Bankruptcy Code, 2016
The Insolvency and Bankruptcy Code, 2016, was enacted to consolidate India’s fragmented insolvency regime, which previously relied on multiple legislations such as the Companies Act, 2013, the SARFAESI Act, 2002, and the RDDBFI Act, 1993. The Code aims to ensure time-bound insolvency resolution, maximize asset value, and balance the interests of debtors, creditors, and other stakeholders.
The groundwork for the IBC was laid by the Bankruptcy Law Reforms Committee (BLRC) chaired by T. K. Viswanathan in 2014. The Code was passed in 2016 after parliamentary scrutiny and came into effect on 28 May 2016. The Insolvency and Bankruptcy Board of India (IBBI) was established as the regulatory body overseeing insolvency professionals and processes.
Under the IBC, both creditors and debtors can initiate insolvency proceedings. The process must be completed within 180 days, extendable by 90 days, with an overall maximum limit of 330 days. For small companies and startups, the period may be reduced to 90 days, extendable by 45. The adjudicating authority for companies and LLPs is the NCLT, while for individuals and partnerships, it is the Debt Recovery Tribunal (DRT).
Upon admission of a case, the NCLT must:
- Declare a moratorium,
- Make a public announcement calling for claims, and
- Appoint an IRP.
Landmark cases such as Innoventive Industries Ltd. v. ICICI Bank and Synergies Dooray Automotive Ltd. established the Code’s procedural framework and judicial interpretation. Over time, high-profile cases like Jet Airways, Essar Steel, and Bhushan Power & Steel have tested and shaped the Code’s boundaries.
BluSmart’s Insolvency Proceedings under the IBC
The insolvency petition against BluSmart exposed serious structural and compliance lapses. The company’s sister concern, Gensol Engineering Limited, had borrowed ₹977 crore from the Power Finance Corporation (PFC) and the Indian Renewable Energy Development Agency (IREDA), promising to purchase 6,400 EVs for BluSmart’s operations. However, only 4,704 vehicles were procured, leaving ₹260 crore unaccounted for. Allegations of financial mismanagement soon emerged, leading to complaints before the Economic Offences Wing.
Catalyst Trusteeship’s claim under Section 7 of the IBC was admissible as BluSmart’s default exceeded the statutory threshold of ₹1 crore. On 29 July 2025, the NCLT, Ahmedabad Bench, formally admitted the petition and imposed a moratorium under Section 14, restraining all suits and recovery actions against the company. A Committee of Creditors (CoC) was subsequently formed, consisting of major creditors like IREDA, Tata Capital, and Axis Bank.
A major challenge in the BluSmart resolution was its complex group structure. BluSmart operated through several subsidiaries—Tech, Charge, Fleet, and Premium Fleet—each holding key assets. Under existing IBC jurisprudence, assets of subsidiaries cannot automatically be brought under the parent company’s CIRP without legal consolidation. This created severe obstacles in asset valuation and recovery, delaying creditor settlements and reducing enterprise value.
The financial crisis also had social and economic consequences. More than 10,000 drivers lost employment overnight, disrupting livelihoods and eroding trust among investors and consumers. BluSmart’s fall reflected the vulnerability of startups dependent on layered financing and limited liquidity buffers.
Policy Recommendations
The BluSmart case underscores the need for significant reforms within India’s insolvency regime to accommodate modern business models and startups.
- Group Insolvency Framework:
India currently lacks a consolidated legal mechanism to address group or cross-entity insolvencies. BluSmart’s multiple subsidiaries created jurisdictional complications and reduced asset recoverability. A unified group insolvency framework—similar to the EU and Singapore models—could allow for joint proceedings, maximizing value and reducing delays. - Revision of Threshold for Default:
Under Section 7 of the IBC, a financial creditor can initiate insolvency for defaults exceeding ₹1 crore. This limit is too low for startups, where revenue streams are irregular and dependent on investment cycles. In BluSmart’s case, insolvency was triggered for a default of only ₹1.28 crore, despite consistent payments over nearly two years. Increasing the threshold to ₹5–10 crore for startups could prevent unnecessary CIRPs due to short-term liquidity crises. - Special Protection for Green and Sustainable Enterprises:
BluSmart’s operations align with India’s climate commitments under the Paris Agreement and the goal of achieving net-zero emissions by 2070. The IBC should introduce provisions for “public interest enterprises,” ensuring that environmentally sustainable ventures are given restructuring support before liquidation. - Adaptation of IBC to Modern Financing Structures:
Startups often use hybrid financing involving venture debt, convertible notes, and equity, unlike traditional bank loans. The current IBC framework favors secured creditors, marginalizing venture investors and operational creditors. Amending voting rights within CoC and expanding the definition of financial creditors could ensure fair representation.
Conclusion
The BluSmart insolvency highlights both the strengths and limitations of India’s Insolvency and Bankruptcy Code. While the Code ensures creditor protection and time-bound resolution, its rigid structure inadequately serves innovation-driven and asset-light startups. The case demonstrates the tension between creditor recovery and the nation’s larger goals of green mobility, sustainable growth, and entrepreneurship.
BluSmart’s asset-light model, reliance on leasing, and multi-entity structure exposed how IBC mechanisms—designed primarily for traditional asset-heavy businesses—struggle to adapt to evolving corporate realities. As India continues to promote electric mobility and sustainable startups, reforms in the IBC framework are necessary to balance economic growth with environmental and social objectives.
The BluSmart case thus stands as a cautionary tale and a call for recalibration of insolvency laws to better suit the dynamic landscape of India’s startup economy.