NCLAT Fortnightly: Important orders on IBC (April 1 – April 15, 2025)

The following is a snapshot of the important orders passed by the National Company Law Appellate Tribunal (“NCLAT”), under the Insolvency and Bankruptcy Code, 2016 ("Code”), during the period between April 1, 2025 to April 15, 2025.

For ease of reference, the orders have been categorized and dealt with in the following categories i.e., Pre-admission stage, Corporate Insolvency Resolution Process (“CIRP”) stage, Post CIRP stage, Liquidation and Miscellaneous.

1. In Akhilesh Kumar v. Bank of Baroda (Company Appeal (AT) (Insolvency) No. 512 of 2025), the NCLAT held that a notice or process served on the corporate debtor at the email address recorded in the records of the Ministry of Corporate Affairs, does not fall foul of rule 38 of the NCLT Rules, 2016 merely on the basis that the email address was not obtained from any application petition or reply filed by the corporate debtor.

2. In Bahadur Ram Mallah v. Assets Reconstruction Company Limited (Company Appeal (AT) (Insolvency) No. 66 of 2025), the NCLAT held that the execution of a global settlement agreement entered into between the corporate debtor and the financial creditor does not change the nature of underlying financial debt and breach of such settlement agreement does not disentitle a financial creditor from maintaining a Section 7 application on the basis of the original debt. It was also observed that a decree of Debt Recovery Tribunal, establishing debt and default, cannot be disregarded based on the pendency of an appeal against such a decree when no stay had been granted.

3. The NCLAT, in IDBI Bank Limited v. Zee Entertainment Enterprises Limited (Company Appeal (AT) (Insolvency) No. 939 of 2023), dealt with issues arising out of the invocation of a guarantee for maintaining a Section 7 application against the corporate debtor. While disposing the appeal against the order of the Adjudicating Authority refusing a Section 7 application on the basis of the invocation of a guarantee during the Section 10A period, the NCLAT went on to emphasize on the specific requirement of invoking the guarantee against the guarantor to trigger the default on the part of the guarantor, even when the deed specifically provided that a demand or notice by the lender to the principal borrower would be sufficient notice and demand for the guarantor as well. It was further observed that mentioning the overdue amount and threatening to take action if such amount is not arranged would not qualify as an invocation of a guarantee.

4. In Anindya Infrastructure Private Limited v. Shubhkamna Buildtech Private Limited (Company Appeal (AT) (Ins) No. 534 of 2021), the NCLAT upheld the decision of the Adjudicating Authority rejecting the Section 9 application and observed that any claim arising from a transaction with a sister concern cannot be treated as a valid claim against the corporate debtor due to the lack of privity of contract. It is interesting to note that while the lack of privity was argued to justify why such claim did not lie, our reading of the facts suggested that there was enough privity, as such amount was directly acknowledged by the corporate debtor where all such payment had been considered to be a payment made to the corporate debtor itself.

Another ground on which the appeal was denied was that the joint development agreement, on which such application was based, was signed by a director disqualified from acting as a director of the corporate debtor under Sections 164(2)(a) and 167(1) of the Companies Act, 2013 as on the date of execution, making the agreement unenforceable. One may, however, question the aforesaid rationale, especially when the NCLAT failed to apply the doctrine of indoor management to protect the interest of the operational creditor.

5. In Vinod Kumar v. Omkara Asset Reconstruction Private Limited (Company Appeal (AT) (Insolvency) No.2265 of 2024), the NCLAT had an occasion to examine whether a Section 7 application would be maintainable when a default of the principal repayment occurred during the Section 10A period, but the interest liability of the default post such period exceeded the statutory threshold under Section 4. It was held that Section 10A prohibition did not extinguish the underlying debt or prevent applications based on separate defaults that occur after the suspension period ends and hence, a Section 7 application is maintainable on the basis of default of interest which continued to accrue and where the default for such interest pertained to the period subsequent to Section 10A.

6. In Iqbal Jumabhoy v. Shri Manoj Kumar Anand (Company Appeal (AT) (CH) (Ins) No. 29/2025), the NCLAT went on to observe that the role of the Resolution Professional in the preparation of report under Section 99(7) of the Code is recommendatory and does not involve adjudication of the rights of any parties, which would have required compliance with principles of natural justice.

7. In EPC Constructions India v. Matix Fertilisers and Chemicals Limited (Company Appeal (AT) (Insolvency) No. 1424 of 2023), the NCLAT upheld the decision of the Adjudicating Authority and reiterated that no Section 7 application lay based on a failure to redeem preference shares when the company had no legally recognizable source (being profit or proceeds from a fresh issue) for redemption of such preference shares. It also went on to observe that just because the redeemable preference shares were issued against the outstanding debt, it would not change the status of such preference shares to that of a debt, especially when such outstanding debt comes to an end upon the issuance of such shares.

1. In Pratibha Industries Limited v. Yes Bank Limited (Company Appeal (AT) (Insolvency) No. 1049 of 2024), the question before the NCLAT was whether the sale of an asset of the corporate debtor would form a part of its liquidation estate, when the auction process had commenced before moratorium, but the actual receipt of balance consideration and issuance of sale certificate occurred during the moratorium. Referring to the decision of the Supreme Court in the case of Celir LLP v. Bafna Motors (Mumbai) Private Limited (2024) 2 SCC 1, which held that if a borrower fails to tender the entire dues with all costs and charges to the secured creditor before publication of the auction notice, their redemption right stands extinguished on the date of publication of the auction notice in the newspaper, in accordance with rule 8 of the SARFAESI Rules, 2002, the NCLAT went on to observe that the properties of the corporate debtor had ceased to be a part of its estate by the virtue of the issuance of a public auction notice under Section 13(8) of the SARFAESI Act, 2002, prior to the CIRP commencement date, which ended the jural relationship between the parties, and hence, Section 14(1)(c) of the Code prohibiting enforcement of security interest during moratorium would not apply and the right of redemption of the borrower/ corporate debtor is extinguished on that date.

The NCLAT failed to consider the judgment of the Supreme Court in the case of Indian Overseas Bank v. RCM Infrastructure Limited (2022 SCC OnLine SC 634), wherein it held that once CIRP was initiated, any action to foreclose, recover or enforce security interests created by the corporate debtor was prohibited due to the Section 14(1)(c) of the Code, which has an overriding effect over other laws. Accordingly, it held that the statutory sale under Sections 8 and 9 of the SARFAESI Rules was to be set aside, as the balance consideration was received post the CIRP commencement date. In our view, the effect of Section 13(8) is merely on the right of redemption of the corporate debtor and does not extend to divesting his ownership rights over the assets, especially when the sale process had not been completed as on the date of moratorium.

2. In Starlog Enterprises Limited v. Pulkit Gupta (Company Appeal (AT) (Insolvency) No. 558 of 2025), the NCLAT held that hire charges for cranes lying unused at the premises of the corporate debtor, which was no longer a going concern, during the CIRP period cannot be treated as CIRP costs under regulation 31(b) of the CIRP Regulations, 2016. It observed that only the cost of goods and services that are permitted to be taken or utilized with the direction of the Resolution Professional, or the Committee of Creditors (“CoC”) can be treated as CIRP costs. Furthermore, it was held that mere commencement of moratorium under Section 14(1)(d) of the Code would not prejudicially affect the rights of the corporate debtor in a manner that would justify treating the hire charges as CIRP costs when it had not raised any invoices or received any hire charges even before the commencement of CIRP.

1. In Regional Provident Fund Commissioner v. Jayesh Sanghajka (Company Appeal (AT) (Insolvency) No. 2100 of 2024), the NCLAT held that the approval of the Resolution Plan by the CoC makes it binding on all the stakeholders, and no additional claims filed can be entertained, even if it related to statutory dues such as provident fund contributions, since it would undermine the ‘clean slate theory’ and disrupt the finality of resolution plans. It was further reiterated that statutory claims such as provident fund dues, if not filed within time, cannot be entertained after the approval of the Resolution Plan.

1. In Vegan Colloids Limited v. Punjab National Bank (Company Appeal (AT) (Insolvency) No. 865 of 2023), the NCLAT held that the amount realized from the trade receivables and trade payments of the corporate debtor, which was improperly appropriated through a one-time settlement with the guarantors by the lender, would constitute a part of the liquidation estate of the corporate debtor under Section 36 of the Code during liquidation proceedings since it was an asset listed in the balance sheet of the corporate debtor. It was also held that where the lender had already relinquished its security interest to the liquidation estate, it was only obligated to receive proceeds through the statutory waterfall mechanism specified in Section 53 of the Code, rather than recovering amounts directly.

1. In Suresh Atlani v. Omkara Asset Reconstruction Private Limited (Company Appeal (AT) (Insolvency) No. 200 of 2025), the NCLAT held that the timeline of 10 days under Section 99(1) of the Code for the Resolution Professional to submit a report is directory and not mandatory. The NCLAT reasoned the same by stating that there are no consequences for non-filing of the report within the prescribed period, and given that it is not a statutory limitation period, an explicit provision for the condonation of delay is immaterial. Further, it was also held that the Adjudicating Authority is well within its jurisdiction to accept such a report and rely on the same, if the delay in the submission is properly explained.

About the authors: Arka Majumdar is a Partner, Vikram Chaudhuri is a Senior Associate and Aakriti Garodia is an Associate at Argus Partners.