Completely unsustainable: Supreme Court sets aside NCLT, NCLAT rulings in ₹600 crore case

The Supreme Court on Tuesday set aside concurrent rulings of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) in a case after concluding that their findings were based on “surmises, conjectures and assumptions” and were completely unsustainable in law [Catalyst Trusteeship Vs Ecstasy Realty].

A Bench of Justices PV Sanjay Kumar and K Vinod Chandran said that the findings by the NCLT and NCLAT were perverse and required interference by the top court.

"We find the present case to be one such case, where the perversity of the findings recorded by the NCLT and by the NCLAT is glaring and manifest, beseeching interference by this Court at the second appellate stage."

The case arose from a Section 7 insolvency application filed by Catalyst Trusteeship Ltd, acting as debenture trustee, seeking initiation of the corporate insolvency resolution process (CIRP) against Ecstasy Realty Pvt Ltd over alleged default on ₹600 crore worth of redeemable non-convertible debentures issued in 2018 for a Mumbai residential-cum-retail project.

The NCLT dismissed the plea in February 2023 and the NCLAT affirmed the decision in April 2025,

Catalyst then approached the Supreme Court in appeal.

The Supreme Court noted that the NCLT and the NCLAT erred in ignoring he binding terms of the debenture trust deed dated March 27, 2018.

The tribunals had accepted the corporate debtor’s case that restructuring discussions with one lender had created an 18-month moratorium, thereby negating default.

The Supreme Court held that this approach was legally flawed.

“We, accordingly, hold that the NCLT and the NCLAT erred in ignoring the binding terms of the Debenture Trust Deed dated 27.03.2018 and in reframing the terms thereof on the strength of surmises, conjectures and assumptions, which were not borne out on facts and were completely unsustainable in law," the apex court said.

The Court emphasised that modification of the debenture trust deed required formal approval and written consent of debenture holders under the prescribed procedure, which was admittedly not followed.

The Bench was also critical of the tribunals for disregarding a Bombay High Court order which had refused to restrain lenders from enforcing the debenture trust deed.

“Unfortunately, this order by the competent civil Court, which is stated to have attained finality, was casually brushed aside by the NCLT and the NCLAT,” the Supreme Court noted.

The NCLAT had further inferred collusion between the debenture trustee and debenture holders to engineer default.

The Supreme Court categorically rejected this. It added that the adverse remarks made against the trustee were liable to be set aside.

The Court clarified that concepts such as pre-existing disputes have “no bearing” on applications filed by financial creditors under Section 7.

Hence, the Supreme Court set aside the orders of the NCLT and NCLAT and directed that the insolvency petition shall be admitted by the NCLT, with further steps to follow in accordance with law.

Catalyst was represented by Senior Advocate Aryama Sundaram and advocates Akanksha Mehra, Himanshu Tyagi, Lakshay Saini and Rohini Musa

The respondents were represented by Senior Advocate Ashwani Kumar with advocates Amit Sharma, Virag Gupta, Dipesh Sinha, Pallavi Barua and Aparna Singh.

[Read Judgment]