Recall of sec. 7 admission order as related party nexus between Financial Creditor and Corporate Debtor pierces corporate veil

By RATHI Company Law Judiciary February 6, 2026

TaxGuru Citation: 2026 taxguru.in 1776
Case Name: Expert Realty Professionals Private Limited Vs Logix Infrastructure Private Limited (NCLAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: Delhi NCLAT, NCLAT

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Expert Realty Professionals Private Limited Vs Logix Infrastructure Private Limited (NCLAT Delhi)

Conclusion: Section 7 application was initiated fraudulently and with malicious intent, in collusion between the Financial Creditor and the Corporate Debtor, for purposes other than genuine insolvency resolution. The order of the Adjudicating Authority allowing the Section 65 application was upheld.

Held: Appellant, Expert Realty Professionals Pvt. Ltd. (Financial Creditor – FC), had entered into an unregistered MoU / Binding Understanding with Logix Infrastructure Pvt. Ltd. (Corporate Debtor – CD) for purchase of 1,37,918 sq. ft. of built-up area in a real estate project. Under this arrangement, the FC infused about ₹15 crore as advance against sale of property. Subsequently, based on minutes of meeting, the advance was purportedly converted into a simpliciter financial debt, with CD acknowledging liability of about ₹12.88 crore, payable without interest for one month and thereafter with interest @18% p.a. Relying on these documents, the FC filed a Section 7 application in 2023, which was admitted. Two homebuyers (Respondents R2 & R3) filed an application under Section 65, alleging that the Section 7 proceedings were collusive, fraudulent, and initiated to defeat the rights of genuine creditors. Appellant (Financial Creditor) contended that MoU and subsequent minutes validly converted the transaction into a financial debt; merely being a related party did not ipso facto amount to fraud or malice under the IBC; section 65 application was filed belatedly and was not maintainable after admission of CIRP. Respondents (Homebuyers) and Corporate Debtor contended that FC and CD were related parties under Section 5(24) of the IBC through common directors and designated partnership in an LLP and Section 7 petition was filed collusively to misuse the insolvency process, evade statutory liabilities, and prejudice genuine homebuyers and other creditors. It was held that MoU and minutes relied upon by the FC lacked credibility, being unregistered, unstamped, and unsupported by contemporaneous conduct or financial records; FC and CD were related parties at the time of execution of the MoU and minutes, as evidenced by common directorships, LLP partnership, and backdated filings with the Registrar of Companies; conversion of a real estate investment into financial debt through informal minutes, without arm’s length safeguards, strongly indicated collusion; financial statements of FC contradicted the existence of the alleged debt, and the Corporate Debtor had admitted default without contest, reinforcing the inference of collusive conduct. Fraud vitiated all proceedings; therefore, a Section 65 application was maintainable at any stage of CIRP, even after admission under Section 7. Adjudicating Authority was justified in piercing the corporate veil to examine the true intent behind initiation of CIRP.

FULL TEXT OF THE NCLAT JUDGMENT/ORDER