The recent judgments under the Insolvency and Bankruptcy Code (IBC), 2016, by the Supreme Court (SC), National Company Law Appellate Tribunal (NCLAT), and National Company Law Tribunal (NCLT) clarify several critical aspects of insolvency resolution, creditor rights, and corporate governance. Key rulings addressed voluntary surrender of loss-making assets, differentiation between speculative investors and genuine homebuyers, the continued role of the Committee of Creditors (CoC) post-approval, treatment of proceeds of crime under PMLA versus IBC assets, and procedural compliance in CIRP. SC upheld commercial decisions by CoC, reinforced protection of bona fide homebuyers, and validated resolution plans where statutory requirements were met. NCLAT emphasized transparency, equity, and proper notice in PRA selection, CIRP costs, and liquidation procedures. NCLT underscored diligent asset verification and proper valuation in approving resolution plans. Collectively, these rulings reinforce the principle that IBC seeks time-bound revival of distressed companies, ensures creditor and homebuyer protection, prevents abuse of the process, and preserves statutory and commercial rights in insolvency proceedings.
1. Supreme Court
Nandini Impex Private Limited (CD) was occupying a property owned by the landowners under Leave and License Agreements. After initiation of CIRP against CD, the CoC made a commercial decision that retaining the property was financially unviable due to high rent and that it should be surrendered. AA granted approval to the decision and directed the RP to hand over possession to the landowners. However, suspended director of the CD challenged
the AA’s decision before the NCLAT. The NCLAT, citing the moratorium under section 14(1)(d) of the Code overturned the decision. In an appeal filed by the landowners, the issues before the Hon’ble SC were, (1) Whether the moratorium under section 14(1)(d) of the Code create an absolute bar preventing an owner from recovering property during CIRP? (2) Can this provision be interpreted to prevent the CoC and RP from voluntarily surrendering a financially burdensome asset based on their commercial wisdom? The SC, while allowing the appeal, held that this was not a case of “recovery” by an owner, but a voluntary surrender based on the CoC’s commercial decision for the CD’s benefit. It observed that the moratorium under section 14(1)(d) of the Code is a “shield” to protect the CD, not a “sword” to force it to retain a loss-making asset. SC accordingly set aside the NCLAT’s order and restored the AA’s order directing the handover of the property to landowners.
Mansi Brar Fernandes Vs. Shubha Sharma & Anr. [Civil Appeal No. 3826 of 2020]
Issues for consideration before SC was whether “speculative investors” are disentitled from initiating proceedings under section 7 of the Code? SC highlighted the adverse effect of speculative investment in real estate as it artificially inflates demand, fuel asset bubbles, and prejudice genuine home buyers. SC, thus, emphasized on differentiating speculative investors and genuine homebuyers through a principled intelligible differentia, to protect the rights of the bona fide homebuyers, deter misuse of the Code and prevent dishonest developers from exploiting systemic loopholes. It further observed that such differentiation between the speculative and genuine investor be made at the time of admitting application under section 7 of the Code and laid down certain criteria to identify speculative investors. For determining whether an allottee is a speculative investor, depends on the facts of each case. The inquiry must be contextual and guided by the intent of the parties; which included indicative factors such as (i) the nature and terms of the contract; (ii) the number of units purchased; (iii) presence of assured returns or buyback clauses; (iv) the stage of completion of the project at the time of investment; and (v) existence of alternative arrangements in lieu of possession. Possession of a dwelling unit remains the sine qua non of a genuine homebuyer’s intent. SC while demarking the interplay between RERA/ IBC and Consumer forum, held that the RERA remains the primary forum for redressal of homebuyers’ grievances, IBC being the last resort, intended to secure revival and the consumer forums being adjudicators for the individual service deficiencies, thereby to avoid conflicting or overlapping orders across multiple fora and achieve their distinct purposes. SC considering the facts of the case that observed that in the first appeal of CD- Gayatri Infra Planner Private Limited, the agreement stipulated a buyback whereby the amount invested would be returned with an additional amount as premium within 12 months. All the four apartments were notionally “allotted”, on the payment of Rs. 35 lakh only to the investor, with no provision for the balance and in lieu the CD issued post-dated cheques amounting to Rs. 1 crore, which were repeatedly dishonoured. Successive extensions of the MoU were granted without justification, SC observed that these circumstances make it clear that the true interest of the appellant lies in assured returns, not possession. The MoU was in substance a buyback contract, not an agreement to sell flats and thus, concluded that investor was a speculative investor, disentitled for invoking section 7 of IBC, 2016. In the second appeal, wherein CD- Antriksh Infratech Private Limited allotted a 4 BHK flat. As per clause 2(a) of the agreement executed between the parties, CD agreed to provide a return of 25% per annum at the end of 24 months or upon the issuance of final land title clearance by the competent authority, whichever was earlier. SC, referring to clauses of the agreement, held that at the end of the stipulated period, the CD was obliged to buyback the apartment and refund the amount along with premium, which was a lucrative agreement for the investor, thereby making the allottee a speculative investor. SC thus, dismissed both the appeals challenging NCLAT’s order wherein it dismissed admission order of AA on the ground that the homebuyers in the cases are speculative investors and not the genuine buyers. SC while emphasizing that the Right to Shelter is an integral part of the right to life under Article 21 of the Constitution and the State carries a constitutional obligation to create and strictly enforce a framework wherein no developer is permitted to defraud or exploit homebuyers; issued direction to various authorities including RERA, IBBI, Central and State government to take actions in this regard. SC further provided for constitution of a Committee withing three months, to be chaired by a retired High Court Judge, with representatives from the Ministry of law, Ministry of Housing, domain experts in Real Estate, Finance and IBC from NIUA, HUDCO’s HSMI, IIMs, NLUs, and NITI Aayog, as well as two eminent industry representatives to suggest commercially viable systemic reforms for cleansing and infusing credibility into the real estate sector.
Kalyani Transco Vs. Bhushan Power and Steel Limited & Ors. [Civil Appeal No. 1808 of 2020]
During the pendency of the application filed for approval of resolution plan filed by JSW Steel Limited (SRA) for Bhushan Power and Steel Limited (CD) before AA, criminal proceedings against the suspended management of the CD were initiated by the Enforcement Directorate (ED) under the PMLA on 25.04.2019. On 05.09.2019, AA approved the resolution plan submitted by SRA with certain conditions. Post approval of the resolution plan, ED passed a provisional attachment order (PAO) on 10.10.2019, attaching assets of the CD under the provisions of PMLA. Besides the CoC challenging PAO, SRA also challenged the PAO of the ED and certain conditions imposed by AA in the approved resolution plan before the NCLAT. On 17.02.2020, the NCLAT, while staying the said orders, upheld the resolution plan and dismissed appeals filed by the OCs and ex-promoters of the CD. When the matter reached the Supreme Court, it initially, by judgment dated 02.05.2025, set aside both the NCLT and NCLAT orders and directed liquidation of BPSL, holding that the JSW plan was noncompliant with sections 30(2) and 31(2) of the Code. Multiple review petitions followed. On 31.07.2025, the Supreme Court recalled its earlier order, holding that there were errors apparent on record and that the legal position had not been correctly appreciated. The case was reheard in August 2025, and the present judgment was delivered on 26.09.2025. The Court dealt with numerous legal questions, including the locus standi of the erstwhile promoters to appeal, the continued existence of the Committee of Creditors (CoC) after plan’s approval, the validity of the clause allowing extension of the implementation period, delays in implementation, priority of payments to operational creditors, distribution of Earnings before Interest, Taxes, Depreciation & Amortization (EBITDA) earned during the CIRP, treatment of contingent and pre-CIRP claims, and compliance with the equity infusion requirement. On the issue of locus standi, the Court held that the erstwhile promoters, being personal guarantors to the CD, qualify as “persons aggrieved” under sections 61 and 62 of the Code. Relying on the judgement of Vijay Kumar Jain Vs. Standard Chartered Bank [(2019)20 SCC 455], it held that their appeals were maintainable. However, the Court noted their conduct throughout the CIRP was obstructive and intended to delay the process, as recorded by the AA. The Court held that the CoC does not become functus officio upon the AA’s approval of the resolution plan. It continues to exist through the Monitoring Committee until the plan is fully implemented, or the appellate process is concluded. This continuity, SC observed, ensures effective supervision of plan implementation and is consistent with the structure of the Code and CIRP Regulation. The legality of clause 3.1, which permitted the CoC by a 66% majority to extend the plan-implementation period, was upheld as a valid exercise of commercial wisdom under section 30(2)(d). Addressing the contention of delay in implementation, the Court found that the delay resulted primarily from the ED’s provisional attachment order under the PMLA and the subsequent judicial proceedings, and not from any fault of JSW Steel. The CoC itself had acknowledged this fact and had voluntarily extended the implementation period. Hence, no interest or penalty could be imposed on JSW. Regarding the allegation of non-compliance with the requirement to pay OCs before FCs, the SC held that the amendment to Regulation 38 of the CIRP Regulations mandating such priority was introduced on 27.11.2019, after the NCLT had approved the plan. Therefore, the plan was in full conformity with the law as it stood at the time of its approval. The payments made by JSW Steel to FCs before OCs could not be treated as a violation. On the claim for distribution of EBITDA earned during the CIRP, the SC categorically rejected the contention of the erstwhile promoters and some CoC members that it should be shared among creditors. It held that EBITDA is merely an accounting term and not an actual measure of distributable profit or surplus. There was no provision either in the Request for Resolution Plan (RFRP) or in the approved plan entitling the CoC or any stakeholder to such distribution. The Court found that BPSL had incurred overall losses during the CIRP and therefore, there was no distributable profit. The SC further upheld the treatment of Jaldhi Overseas Pte. Limited’s claim as contingent, since it was based on unenforced international arbitral awards whose enforcement petitions had been withdrawn from the Calcutta High Court. It clarified that the IBC permits sub-classification of OCs where justified. Similarly, it upheld the RP’s and AA’s treatment of payments made to Medi Carrier and CJ Darcl Logistics as payments for continuing operations during CIRP. On the issue of equity infusion, the SC accepted JSW Steel’s explanation that the investment was made partly through equity and partly through Compulsorily Convertible Debentures (CCDs), which in substance qualify as equity as held in IFCI Ltd. Vs. Sutanu Sinha [2023 SCC onlines SC 1529]. The SC found that the plan obligations had been fully met and that the CoC itself had confirmed compliance. The Supreme Court upheld the validity and implementation of JSW Steel’s resolution plan for Bhushan Power and Steel Limited and dismissed all appeals.
F.2 National Company Law Appellate Tribunal
Anil Kohli, RP for Dunar Foods Limited Vs. Directorate of Enforcement and Ors. [CA(AT)(Ins) No. 389 of 2018]
Dunar Foods Limited (CD) availed credit facilities from a consortium of banks led by the State Bank of India (FC). Owing to defaults in making repayments, the account of CD was classified as NPA and steps under section 13(2) of the SARFAESI were initiated. Subsequently, petition section 7 of the Code was filed against the CD. Shortly, after passing admission orders by AA on 22.12.2017 initiating CIRP against the CD, the ED issued a Provisional Attachment Order (PAO) under the PMLA on 26.12.2017, attaching the assets of the CD aggregating to Rs.177.34 crores as proceeds of crime. Thereafter, the said PAO was also confirmed by the competent authority under PMLA. In response to the attachment orders, the RP sought recall of the PAO and release of CD’s assets attached by the ED. The AA, vide order dated 21.05.2018, held that the PAO issued by the ED under section 5(1) of the PMLA did not fall within the scope of the moratorium under section 14 of the Code. Aggrieved with the same, the RP filed an appeal before the NCLAT under section 61(1) of IBC, 2016. The issues before the NCLAT were as follows: (i) Whether provisional attachment by the ED under the PMLA violates the moratorium under section 14 of the Code (ii) Whether the IBC can override PMLA in cases involving CD’s tainted assets; (iii) Whether AA/NCLAT have jurisdiction to interfere with assets attached and confirmed by the ED under the PMLA. NCLAT in its judgment dated 03.07.2025, observed that while the PAO was passed a few days after the CD was admitted into CIRP, whereas the investigation under the PMLA had commenced much before. It observed that if the property is alleged to be “proceeds of crime” and is already under adjudication by competent authority, such property cannot be deemed to be part of the freely available resolution estate under the Code. Thus, the issuance of the PAO by ED under the PMLA does not violate the moratorium under section 14 of the Code. Further, it held that the PMLA is a criminal law designed to trace, attach, and confiscate proceeds of crime, while the IBC is a commercial legislation aimed at facilitating time-bound insolvency resolution of financially distressed companies; thus PMLA and IBC operate in distinct spheres, and section 238 of the IBC cannot override the PMLA in respect of proceedings involving proceeds of crime.
Indian Bank Vs. Anshul Gupta, liquidator of Topsgroup Services and Solutions Limited [CA(AT)(Ins) No. 85 of 2025 with CA (AT) (Ins) No. 96 of 2025]
On an application filed by the Punjab National Bank (FC) under section 7 of the Code, CIRP was initiated against Tops group Services and Solutions Limited (CD). Indian Bank, which held a security interest under a hypothecation deed against the CD, received an amount of Rs.4,65,58,425.87/- in its current account as Income Tax Refund (IT Refund). The RP approached the AA seeking the IT Refund as the asset of the CD. The AA, vide order dated 20.12.2022, directed the Indian Bank to transfer the amount to the liquidation bank account of the CD. The Indian Bank filed an appeal before the NCLAT against the order of AA . The NCLAT held that IT Refund received by the bank in the CD’s account during CIRP cannot be treated as receivables of the bank and such amount must be remitted to the liquidation account of the CD.
Rakesh Verma, AR for Granite Gate Properties Private Limited Vs. Devendra Singh & Anr. [CA(AT)(Ins) No. 1479 of 2024]
Granite Gate Properties Private Limited (CD), a real estate developer, was allotted land by the New Okhla Industrial Development Authority (NOIDA) under a lease deed requiring payment of premium in instalments. As the CD defaulted in remitting certain premium to NOIDA and delay in completion of housing project, the homebuyers (FC) initiated CIRP against the CD under section 7 of the Code. Thereafter, the plan submitted by SRA was approved by the CoC with 99.14% voting and RP had filed an application for approval of the plan. However, the AA remitted the resolution plan back to the CoC and held that it would be for CoC to take a call, as to whether the CIRP should resume from the stage of preparation of IM or from any other stage or present SRA/ PRA’s should be given opportunity to submit revised resolution plan after forensic audit and proper fresh valuation of the assets of the CD. Further, AA held that NOIDA would be entitled to two instalments of premium and the amount which is payable towards water and sewage charges as also the time extension charge, etc. to it by the CD as CIRP cost. Aggrieved by the order of AA, the AR of homebuyers and NOIDA appeal before NCLAT. The issues before the NCLAT were: (i) Whether two instalments i.e. 19th and 20th instalment, which fell due after commencement of CIRP, can be treated to be CIRP cost. (ii) Whether the amount which is payable towards water and sewer charges is CIRP cost? (iii) Whether time extension charges as claimed by NOIDA are CIRP cost, which is liable to the paid in the resolution plan? The NCLAT observed that lease premium instalments are not covered under section 14(1)(d) of the Code, as such NOIDA is entitled to claim 19th and 20th instalment premium. On the second issue, it held that the unpaid water and sewer charges arising during the CIRP period are liable to be paid as CIRP cost. Further, the NCLAT observed that the time extension charges are those charges for keeping the project as going concern. As such the time extension charges after expiry of maximum period of construction can be levied by NOIDA subject to maximum period of 3 years towards CIRP costs as contemplated in the lease deed. As regards the fresh consideration of plan by AA; NCLAT, permitted the RP to issue an addendum to the IM incorporating the liabilities of the payment of premium and water & sewage charges arising during the CIRP period being part of IRP costs and to provide the RFRP to all the PRAs in the final list.
Myotic Trading Private Limited Vs. Deepak Maini, RP of Amzen Transportation Industries Limited & Anr. [CA(AT)(Ins) No. 859 of 2025]
The appeals arose during the challenge mechanism between two prospective resolution applicants (PRAs), the eligibility of one PRA under section 29A of the Code became the central dispute. The appellant, a competing PRA which had initially been declared the winner, questioned the later decision of the CoC to treat the rival PRA as eligible and the conduct of the RP in continuing the process, despite serious regulatory and investigative developments concerning the CD. On facts recorded in the proceedings, the CoC first declared the rival PRA ineligible under section 29A of the code after obtaining multiple independent assessments, including final reports affirming ineligibility on several limbs of section 29A of the code owing to connections with entities that had undergone insolvency. Thereafter, upon remand from the AA to reconsider the issue, the CoC received yet another adverse report but, instead of grappling with the contradictions, reversed its position primarily on the strength of a solitary legal opinion. The minutes did not show a reasoned application of mind on why that opinion should prevail over consistent adverse expert findings. During this period, a challenge process was carried forward; the appellant was impacted when its earlier status was withdrawn without meaningful notice or hearing. Parallelly, it was urged that the information memorandum and the request for resolution plans were not updated to reflect material developments—such as ongoing investigations by enforcement agencies and a provisional attachment order despite these having a direct bearing on valuation, feasibility, and compliance.
Both applications filed by the appellant before the AA—one challenging the rival PRA’s eligibility, and another seeking directions regarding process irregularities including replacement of the RP, reconstitution of the CoC, and cancellation of the bidding framework–were dismissed on the threshold ground of locus standi, without an examination on merits. In appeal, the NCLAT agreed that, following the withdrawal of a consortium partner, the appellant did not meet the eligibility threshold under the request for resolution plans and, therefore, lacked locus as a PRA. At the same time, looking NCLAT found that the rival PRA’s eligibility under section 29A of the Code had not been satisfactorily established by the CoC, which appeared to have preferred a contrary legal opinion without addressing multiple expert determinations to the opposite effect. It also noted that the AA’s order in the connected matter was non speaking, and that the overall conduct of the process especially the failure to transparently disclose material enforcement and investigative actions did not align with the scheme of the Code. Given these infirmities, the NCLAT directed that the CIRP to recommence from the stage of issuance of a fresh Form-G, so that a legally compliant and transparent process can be undertaken in accordance with the law. The application was remanded to the AA for fresh consideration on merits after providing due opportunity to the parties.
Prakash Oil Depot Vs. G. Madhusudhan Rao & Ors. [CA(AT)(Ins) No. 304 & 306 of 2025]
AA ordered liquidation of M/s. Sarda Agro Oils Limited (CD) on 09.01.2023. M/s. Prakash Oil Depot submitted a scheme of compromise and arrangement under section 230 of the Companies Act, 2013, to revive the CD. However, this scheme was not completed within the 90-days timeline as prescribed under Regulation 2B of the Liquidation Regulations, 2016. Despite several extensions granted by the AA, the scheme was not finalised and a final application for another 90-days extension was rejected. In an appeal filed by the scheme proponent, the issues before the NCLAT were as follows: (i) Is the 90-days timeline prescribed by regulation 2B of Liquidation Regulations for completing a scheme of arrangement mandatory or directory in nature? (ii) Can the timeline be extended to facilitate a scheme that has been approved by the Stakeholders’ Consultation Committee (SCC) and aligns with the Code’s objective of revival? The NCLAT, while allowing the appeal, held that the timeline in Regulation 2B of Liquidation Regulation is directory and not mandatory. It observed that a procedural timeline in a subordinate regulation cannot be applied so rigidly as to frustrate the primary objective of the Code, which is the revival of the CD. It further observed that the commercial wisdom of the parties, manifested through the SCC’s approval of the scheme, must be given due respect.
Kurien Thomas, suspended director of Koravampady Estates and Enterprises Private Limited Vs. The South Indian Bank & Ors. [CA(AT)(Ins) No. 07 of 2025]
The issue revolved around the validity of initiating the CIRP under section 7 of the IBC, 2016, particularly when the alleged default date was claimed to fall within the section 10A of the Code dealing with aspect of suspension period. Another issue was whether the FC could pursue IBC proceedings while SARFAESI, 2002 actions as writ petitions were pending. The dispute stemmed from a Rs. 3.12 crore Cash Credit Agricultural Loan sanctioned in 2015, later renewed in 2020. The bank classified the account as NPA on 31.05.2021 and issued recall and demand notices under SARFAESI in July 2021. Subsequent litigation included writ petitions before the Karnataka High Court, which temporarily restrained SARFAESI actions. Notwithstanding this, the bank filed a section 7 petition in November 2023, and later auctioned a property in March 2024 under SARFAESI, which was stayed by the High Court in April 2024. The AA admitted the CIRP on 30.05.2024. Though a settlement offer was later made, the NCLAT dismissed the appeal on 06.08.2025. The NCLAT held that the CIRP initiation was valid, as the debt exceeded the statutory threshold and the default date of 31.05.2021 was outside the section 10A’s protection. It found the appellant’s settlement offer as an unqualified admission of liability and criticized him for concealing facts and lacking clean hands. The NCLAT, thus, upheld that parallel proceedings under SARFAESI and IBC are legally permissible, applying the Doctrine of Election to justify the creditor’s right to pursue concurrent remedies. It observed that – (i) Section 10A’s protection is strictly time-bound, (ii) simultaneous SARFAESI and IBC proceedings can coexist, and (iii) an appellant’s credibility and full disclosure significantly affect outcomes in insolvency cases.
Shobhana Thakkar & Anr. Vs. Monitoring Committee of Ashiana Landcraft Realty Private Limited & Anr. [CA(AT)(Ins) No. 2156 of 2024]
Shobhana Thakkar along with other applicants was one of the non-convertible debenture holders (NCD) of Ashiana Landcraft Realty Private Limited which was later admitted into CIRP. Such investment was made under a Portfolio Management Scheme facilitated by Piramal Funds Management Private Limited (“Piramal”) which were secured with IDBI Trusteeship. However, relation between them and some NCD holders got adverse, and an FIR was also lodged against Piramal Fund Manager and IDBI Trusteeship by some NCD holders with Economics Offences Investigation Wing (EOW), New Delhi for commission of fraud and misrepresentation. Meanwhile, an application seeking approval of resolution plan was filed before AA. Piramal filed a criminal writ petition before the Delhi HC for quashing of the FIR filed with EOW wherein it was proposed that they are ready to pay Rs. 80.53 Crores from their own pocket to the NCD holders, in order to save their goodwill. Delhi HC knowing well that resolution plan is under implementation, separated the AA’s proceedings from criminal proceedings vide order dated 05.09.2023 which was amended by subsequent order of date 20.09.2023 pertaining to the remittance of amount to the NCD holders through DDs. Thereafter, NCD holders filed an application before AA for consideration of their claim under the plan. The said application was rejected by AA as NCD holders has already received more amount under the settlement scheme. An appeal was preferred against order of AA. NCLAT emphasized that the order of Delhi HC dated 05.09.2023 clearly records that the offer/proposal of Piramal Fund Manager which was placed before all the investors/ debenture holders provided that if they accept money under the settlement put forth by the Piramal Fund Manager they will not get anything under the resolution plan. NCLAT while rejecting the appeal noted that NCD holders have exercised their option to receive the principal sum invested by them under settlement scheme and prevented them from accepting the benefits of both the settlement and the resolution plan, which would otherwise amount to unjust enrichment.
Bharti Goyal & Ors. Vs. Hector Realty Venture Private Limited & Anr. [CA(AT)(Ins) No. 1545 of 2024]
Bharti Goyal along with 19 other homebuyers of Hector Realty Venture Private Limited filed an appeal challenging order dated 14.05.2024 of AA dismissing the application which sought to recall order of withdrawal of CIRP. It was contended that such withdrawal was obtained by fraud and misrepresentation. Issues for consideration before NCLAT were (i) whether their application is maintainable at this stage when the CIRP process has been completed? (ii) Whether the homebuyers have the locus to agitate their claim at this belated stage due to non-filing of claim within stipulated period? (iii) Whether the withdrawal of CIRP of CD by order dated 07.09.2022 was vitiated by fraud and suppression of material facts? (iv) Whether NCLAT can order recall of its own order? NCLAT observed that public announcement was made by RP and only a group of 9 homebuyers came forward for filing their claim. Despite availability of list of creditors with the RP he put no efforts to reach out to the homebuyers whose claims were not presented before him and thus, has violated the provision of Regulation 6A of the CIRP Regulations. Emphasizing that the homebuyers are FCs as ‘allottees’ under section 5(8)(f) of the Code; and they are entitled to participate in the CIRP; NCLAT observed that “The Code, while commercial in nature, is not blind to equity and fairness. Homebuyers must not be left remediless due to the inaction or selective conduct of a Resolution Professional, especially when they have acted in good faith and their claims are traceable to the records of the Corporate Debtor. The law must protect substance over form and ensure that the legitimate financial interests of homebuyers are not erased through procedural oversights”. With regards to withdrawal of CIRP by fraud, NCLAT observed that it was presented before AA while seeking such withdrawal from CIRP was that no CoC has been formed. Such misrepresentation about formation of CoC allowed the RP/CD to bypass the mandatory procedure under section 12A of the Code, which requires 90% approval of CoC members for withdrawal of CIRP. This selective constitution of the CoC enabled a limited and convenient decision-making process, which excluded the larger class of financial creditors, including Bharti Goyal and other 19 homebuyers. With regards to power of recalling an order, relying upon the judgment of Union Bank of India (Erstwhile Corporation Bank) Vs. Dinkar T. Venkatasubramanian & Ors., [CA(AT)(Ins) No.729 of 2020], NCLAT observed that the power to recall a judgment obtained by fraud is inherent and preserved under rule 11 of the NCLAT Rules, 2016. Consequently, NCLAT set aside the AA’s order, restored the CIRP, and reaffirmed that exclusion of genuine homebuyers due to the IRP’s failure amounts to violation of principles of fairness and creditor equality.
Maithan Alloys Limited Vs. Eastern Power Distribution Company of Andhra Pradesh Limited & Anr. [CA(AT)(Ins) No. 1514 of 2024]
Maithan Alloys Limited purchased CD- Implex Metal & Ferro Alloys Limited as going concern. Meanwhile, an IA seeking restoration of electricity was filed before AA. AA directed successful purchaser to make payment of Rs. 24.50 crores including Rs. 4.5 crores towards security deposit to APERC (Andhra Pradesh Electricity Regulatory Commission), an electricity distribution company wholly owned by the State of Andhra Pradesh. Pursuant to which successful purchaser was facilitated the issuance of a sale certificate on 16.09.2021, thus, solidifying the ownership of the CD and on the other hand, APERC was directed to restore the connection within three days, retain the security deposit as per regulations, refund the balance within seven days, and approach the liquidator for dues under section 53 of the Code. An appeal was filed by the successful purchaser challenging order of AA, which was dismissed by the NCLAT. APERC, subsequent to order of SC wherein providing clarity on the validity of deduction of certain chares, after deducting Rs. 3,16,08,440/- refunded the balance amount to successful purchaser which was challenged by the successful purchaser before AA wherein challenging such deduction of amount on the pre-text of true-up charges as illegal and pertaining to the pre-CIRP period. Upon rejection by AA, appeal was preferred before NCLAT by the successful purchaser. NCLAT observed that such deduction of true up charges which are basically the difference between the actual cost of electricity supply and the estimated cost which are considered during annual tariff setting by APERC; was calculated on the basis of the relevant provisions of the Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulation, 2005 (Regulation 4 of 2005), notified by the APERC and were pertaining to the post-CIRP period and thus, are payable by the successful purchaser. NCLAT while dismissing the appeal, observed that “it is noted that under this clause the Liquidator process is closed when the Corporate is sold on going concern basis, which implies that the Corporate Debtor survive and there is no need to dissolve the company in terms of Section 54 of the Code. It further implies that all existing rights and obligations and responsibilities including claims, licenses, permits of various authorities, etc., continues to operate in favour of the Corporate Debtor. The Liquidator merely transfers the ownership of the Corporate Debtor to the Successful Auctioneer Purchaser like present Appellant.”
In 2010, Greater Noida Industrial Development Authority (GNIDA) allotted land to a consortium led by Earth Infrastructure Limited (EIL), which later incorporated Earth Towne Infrastructure Private limited (CD/ETIPL) as a special purpose vehicle. A development agreement was entered between the EIL and CD, with built-up area sharing at 18% for ETIPL and 82% for EIL and GNIDA sanctioned the building plan for CD. Since 2015, the homebuyers entered into buyers’ agreements with ETIPL (landowner/CD) and EIL (developer), for apartments in “Earth Towne”. However, EIL was admitted into CIRP. Many homebuyers had filed and got their claims admitted by the RP of the EIL (holding company of the CD). The AA, vide order dated 21.10.2024, dismissed the CIRP action initiated by the homebuyers under section 7 of the Code. The AA observed that out of the 146 claimants to the present petition, 80 claims have already been admitted in the resolution plan of EIL, the remaining 66 claimants are below the threshold of 100 to initiate separate action against the CD under section 7 of the Code. In appeal, the issues before the NCLAT were: (i) Whether the homebuyers met the threshold requirement under section 7(1) of the IBC, 2016. (ii) Whether simultaneous proceedings could be initiated against both the EIL and CD for the same project. The NCLAT observed that the AA erred in computing the threshold by excluding homebuyers whose claims were admitted in the CIRP of EIL. Thus, the NCLAT held that homebuyers may proceed against both developer and landowner jointly where their roles are intertwined, ensuring no allottee is left remediless.
NCLAT dismissed appeal filed by the workmen’s union challenging the RP’s layoff notice dated 01.02.2020. The union alleged that the RP had acted illegally by issuing the notice without clearing provident fund & gratuity dues and without following sections 25C, 25F, and 25M of the Industrial Disputes Act, 1947. It also argued that the RP lacked the authority to declare layoffs. The NCLAT upheld the NCLT’s dismissal of the union’s application, holding that the layoff was justified as no operations were taking place and the company lacked financial capacity. NCLAT held that wages during CIRP are payable only if the CD was a going concern and workmen actually rendered services. Since the employees had not worked after the layoff, they were not entitled to any wages beyond that date except as provided in the approved resolution plan. The NCLAT further noted that the AA lacked jurisdiction to adjudicate disputes under the Industrial Disputes Act, 1947 and reaffirmed that the approved resolution plan is binding on all stakeholders.
CIRP of Rajesh Landmark Projects Private Limited commenced on 10.10.2022 appoiniting Mr. Manish Jaju as RP. In the 33rd CoC meeting (10.12.2024), the CoC rejected the resolution plan and decided to liquidate the CD, recommending Mr. Jaju as the liquidator. AA allowed liquidation but appointed Ms. Smita Gupta as liquidator, citing IBBI Circular dated 18.07.2023, which suggested appointment of RP other than the existing IRP/RP be appointed as liquidator in all future cases. Aggrieved, Mr. Jaju appealed against the order before the NCLAT, challenging only the part of the order relating to the appointment of liquidator, not the liquidation itself. He argued that under section 34(1) of the Code, the RP must continue as liquidator unless replaced for valid reasons. The IBBI circular was a general advisory, not a case-specific recommendation. The CoC supported Jaju’s appointment and Ms. Smita Gupta stated that appointment of the liquidator is the prerogative of the AA, but she did not contest the appeal on merits. She only claimed reimbursement for expenses of Rs. 45,625 incurred after her appointment. NCLAT observed that the default position under section 34(1) of the Code is that the RP continues as the liquidator unless replaced and replacement is permissible only under specific circumstances mentioned in section 34(4) of the Code, including a case-specific recommendation from IBBI. The IBBI Circular dated 18.07.2023 was a general direction, not a formal recommendation in any particular case. The Board exceeded its authority under section 34(4)(b) of IBC, 2016 by issuing a blanket directive that in all cases, RPs should not be appointed as liquidators. NCLAT observed that such a general instruction contradicts the legislative intent of section 34(1) and infringes upon the adjudicatory discretion of AA. NCLAT while setting aside AA’s order observed that AA has misapplied this circular and acted contrary to the statutory scheme and held that the appointment of Ms. Smita Gupta as liquidator was unsustainable in law and there were no valid grounds under section 34(4) of the Code for replacing Mr. Jaju. The IBBI’s letter cannot serve as a recommendation for replacement of the Mr. Jaju.
F.3 National Company Law Tribunal
Nirmal Kanodia Vs. Balajee Ingot India Private Limited [CP(IB) No. 39 of 2024]
The CD was admitted into the CIRP on an application under section 7 of the Code. The RP invited expressions of interest, to which twenty prospective applicants responded, though only one resolution plan was ultimately received. The CoC, comprising a single unsecured financial creditor holding 100% voting share, approved the plan with full majority. The plan proposed a total payment of Rs. 20 lakh against admitted claims of over Rs. 20 crore, amounting to a haircut of nearly 99%. On examination of the plan, the AA noted significant irregularities in the conduct of the process and deficiencies in the valuation exercise. It observed that although the book value of the company’s financial assets exceeded Rs. 4 crore, the valuers, based on confirmations received from the resolution professional, had reduced the realizable value to ‘nil’, citing that loans, deposits and receivables were unrecoverable or time-barred. The AA found that no legal recourse had been taken to recover these amounts, nor was there any justification for writing them off without proper verification. It also questioned the drastic undervaluation of assets and the nominal allocation to government dues exceeding Rs. 16 crore, noting that such assessment lacked substantiation. AA held that the resolution professional failed to discharge the statutory duty of preserving and protecting the assets of the corporate debtor and had mechanically accepted valuations without adequate scrutiny. The resolution plan, therefore, was found non-compliant with section 31(1) of the Code and was not approved.
