Issues: Whether the co-developers were entitled to execute the registration documents in favour of the homebuyers and allottees in the Doon Square project under the Master Agreement dated 08.10.2024.

Analysis: The project had already been completed, the Occupancy Certificate had been obtained, the lender had issued a No Dues Certificate, and the project was being implemented in terms of the Master Agreement approved by the Tribunal. Clause 6 of the Master Agreement authorised the co-developers to sign, execute and present for registration the documents required for transfer and sale of units, including deeds and allied instruments in favour of prospective purchasers and allottees. In these circumstances, the communication seeking joint nomination of an authorised person was held to be capable of being complied with by the co-developers acting under the agreement.

Conclusion: The co-developers were held entitled to execute the registration documents in favour of the homebuyers and allottees in accordance with the Master Agreement dated 08.10.2024.

Issues: Whether a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be used to enforce a final money decree and recover a disputed decretal amount against a solvent corporate debtor.

Analysis: The operative question was not whether any liability existed in the abstract, but whether the insolvency forum could be invoked as a substitute for execution of a civil decree. The Court reiterated that the Insolvency and Bankruptcy Code is a revival and resolution statute, not a recovery legislation. Where a decree holder has the ordinary and efficacious remedy of execution, and the real dispute concerns the computation and quantification of the amount due, resort to Section 7 proceedings is impermissible if it functions only as a coercive debt recovery tool. The Court also noted the respondent's inconsistent stands on the amount due, the pendency of execution-related proceedings before the High Court, and the solvent and functioning nature of the appellant.

Conclusion: The Section 7 proceedings were an abuse of the insolvency process and could not be maintained as a recovery mechanism for a money decree. The impugned admission order was unsustainable and the dismissal of the Section 7 application was restored.

Ratio Decidendi: Insolvency jurisdiction under Section 7 of the Insolvency and Bankruptcy Code, 2016 cannot be invoked as a substitute for execution of a money decree, particularly where the dispute is essentially about quantification of the decretal amount and the corporate debtor is not shown to be genuinely insolvent.

Issues: (i) Whether the application filed by the Resolution Professional seeking eviction of the Appellant from the Corporate Debtor's premises was maintainable and within the jurisdiction of the Adjudicating Authority; (ii) Whether the Appellant proved any tenancy, leasehold right, or licence in respect of the premises; (iii) Whether the interim order of the City Civil Court precluded the Adjudicating Authority from passing the impugned eviction order.

Issue (i): Whether the application filed by the Resolution Professional seeking eviction of the Appellant from the Corporate Debtor's premises was maintainable and within the jurisdiction of the Adjudicating Authority.

Analysis: The Resolution Professional is duty-bound to take control, custody, preserve, and protect the assets of the corporate debtor. Where the premises admittedly belong to the corporate debtor and are in the occupation of a third party claimed to be unlawful, the application for recovery of possession has a direct nexus with the insolvency process. The Adjudicating Authority's jurisdiction under the Code extends to such relief, and the need to avoid delay in the insolvency process supports adjudication before that forum rather than by a separate civil suit.

Conclusion: The application was maintainable and the Adjudicating Authority had jurisdiction to entertain it.

Issue (ii): Whether the Appellant proved any tenancy, leasehold right, or licence in respect of the premises.

Analysis: The only material relied upon was a letter permitting the Appellant to stock marble at the premises. There was no written lease, no proof of rent, no rent receipts, and no adequate pleading or evidence showing creation of an oral tenancy or any subsisting licence or leasehold right. The Appellant's own pleadings indicated permission to occupy only for business convenience, and the record did not establish any legally enforceable interest in the immovable property.

Conclusion: No tenancy, leasehold right, or licence was proved, and the Appellant was in unauthorised occupation.

Issue (iii): Whether the interim order of the City Civil Court precluded the Adjudicating Authority from passing the impugned eviction order.

Analysis: The interim order protected possession only until the next date and expressly preserved eviction in accordance with due process of law. Proceedings concerning possession of the corporate debtor's asset fell within the Adjudicating Authority's domain under the Code, and the civil court could not bar such adjudication. The interim order therefore did not obstruct the impugned directions.

Conclusion: The City Civil Court's interim order did not bar the Adjudicating Authority from passing the eviction order.

Final Conclusion: The appeal failed on all substantive grounds, and the direction to vacate the premises was sustained.

Ratio Decidendi: Where premises owned by the corporate debtor are in unauthorised occupation, the Resolution Professional may seek recovery of possession before the Adjudicating Authority as part of the duty to preserve and protect the corporate debtor's assets, and a civil court's interim protection does not override that jurisdiction when relief is sought in accordance with due process of law.

Issues: (i) Whether the clarifications furnished by the resolution applicant (SEML) in response to queries from the resolution professional/CoC resulted in any enhancement or modification of SEML's Resolution Plan; (ii) Whether, after approval by the NCLT and affirmation by the NCLAT and implementation of the plan, this Court may interfere at this stage.

Issue (i): Whether clarifications furnished by SEML altered the substance of its resolution plan with respect to (a) replacement/ treatment of bank guarantees and related margin money and (b) conversion of deferred payment into an enhanced upfront payment.

Analysis: The Resolution Plan originally provided that margin money aggregating to Rs.180.05 crores would flow to the CoC and that SEML would infuse Rs.103.39 crores as fresh margin money for BGs it intended to continue; the remaining Rs.76.61 crores related to BGs proposed to be extinguished and thereby released to the CoC. The RP's email sought clarifications on timing and treatment; SEML's responses explained that the margin money for BGs to be extinguished would be returned to the CoC and that replacement margin money would be provided to issuing banks until formal release. On deferred payment, SEML's plan offered NCDs whose face value and coupon produced an aggregate higher cashflow, with Rs.240 crores being the present discounted value (NPV) payable upfront if the CoC so elected. The clarifications merely explained mechanics and reaffirmed existing valuation (NPV) and timing options; they did not increase the aggregate consideration payable to the CoC nor substitute new commercial terms beyond what the plan already allowed.

Conclusion: The clarifications did not amount to any enhancement or material modification of SEML's Resolution Plan.

Issue (ii): Whether this Court may entertain interference after concurrent approvals by NCLT and NCLAT and implementation of the Resolution Plan.

Analysis: Appeals to this Court under Section 62 are confined to questions of law. Appeals under Section 61(3) before the NCLAT are limited to specified grounds including material irregularity by the RP. The RP acted on the CoC's directions in seeking clarifications; such conduct cannot be characterised as material irregularity. There are concurrent factual and legal findings by the NCLT and NCLAT that no material irregularity occurred and that the CoC's commercial wisdom governed approval; absent demonstrable arbitrariness, illegality, or ignorance of mandatory provisions, appellate interference is not warranted. The Resolution Plan was implemented and amounts paid, further diminishing scope for intervention.

Conclusion: No interference is permissible; the appeals are not maintainable on the invoked grounds and must be dismissed.

Final Conclusion: The concurrent findings of the NCLT and NCLAT that SEML's clarifications did not modify its Resolution Plan and that no material irregularity by the RP occurred are upheld; the commercial wisdom of the CoC in approving the plan remains non-justiciable except on the narrow statutory grounds, and the appeals are dismissed.

Ratio Decidendi: Courts' review of an approved resolution plan is limited to the statutory grounds in Sections 30(2) and 61(3) of the Insolvency and Bankruptcy Code, 2016; clarifications that merely explain contractual mechanics or reaffirm present values do not constitute material modification, and decisions of the Committee of Creditors exercising commercial wisdom are not amenable to substitution by judicial review absent arbitrariness, illegality or material irregularity by the resolution professional.

Issues: (i) Whether the Corporate Debtor was rightly admitted into the corporate insolvency resolution process on proof of financial debt and default; and (ii) whether the housing society had locus standi to intervene in the Section 7 proceedings before the appellate forum.

Issue (i): Whether the Corporate Debtor was rightly admitted into the corporate insolvency resolution process on proof of financial debt and default.

Analysis: Admission under Section 7 of the Insolvency and Bankruptcy Code, 2016 is controlled by the existence of a financial debt and the occurrence of default. Once those ingredients are established, the adjudicatory forum is not to weigh commercial viability, project completion, anticipated receivables, or alleged hardship to stakeholders at the admission stage. The narrow exception recognised in Vidarbha Industries does not displace the general rule and cannot be used to refuse admission where default is admitted and no legally sustainable ground is shown to negate it. Parallel recovery proceedings under SARFAESI or before the DRT do not bar initiation of CIRP, and allegations of coercive or mala fide invocation require specific pleading and proof of abuse of process.

Conclusion: The Corporate Debtor was rightly admitted into CIRP; the challenge to admission fails and is against the appellant.

Issue (ii): Whether the housing society had locus standi to intervene in the Section 7 proceedings before the appellate forum.

Analysis: A society or association of homebuyers is not, by that status alone, a financial creditor or an operational creditor under the Code. The right to participate in insolvency proceedings is statutory, and pre-admission proceedings under Section 7 remain essentially confined to the applicant creditor and the corporate debtor. Collective participation of allottees is channelled through the statutory framework after admission, including representation in the committee of creditors through the authorised representative mechanism. Rule 11 of the NCLAT Rules, 2016 cannot be used to create a substantive right of audience contrary to the Code. In the absence of demonstrated statutory standing or a legally cognizable right to intervene, no prejudice or violation of natural justice is made out.

Conclusion: The society had no locus standi to intervene, and rejection of its intervention application is upheld.

Final Conclusion: The admitted debt and default justified CIRP, and the proposed intervention by the society could not override the statutory scheme governing participation in insolvency proceedings.

Ratio Decidendi: In a Section 7 proceeding, once financial debt and default are established, admission follows and extraneous considerations of viability or alleged creditor motive cannot defeat the petition, while a society of allottees has no independent locus to intervene unless the Code confers such participation.

Issues: (i) Whether dues payable under Section 9(2) of the Central Sales Tax Act, 1956 constitute secured debt by creating a first charge on the corporate debtor's assets; (ii) Whether the approved resolution plan suffered from any infirmity on account of non-recognition of such CST dues as secured debt.

Issue (i): Whether dues payable under Section 9(2) of the Central Sales Tax Act, 1956 constitute secured debt by creating a first charge on the corporate debtor's assets.

Analysis: Section 9(2) of the Central Sales Tax Act, 1956 was held to be a machinery provision dealing with assessment, collection, enforcement, and allied recovery procedures through the State sales tax framework. The provision imports procedural powers and applicable recovery mechanisms, but it does not contain any express language creating a statutory first charge comparable to Section 48 of the Gujarat Value Added Tax Act, 2003. The distinction between procedural recovery powers and a substantive charge on property was treated as decisive. The precedents dealing with GVAT dues were found inapplicable because they rested on the express first-charge provision in that statute.

Conclusion: The CST dues were not secured debt and did not enjoy first-charge status on the corporate debtor's assets.

Issue (ii): Whether the approved resolution plan suffered from any infirmity on account of non-recognition of such CST dues as secured debt.

Analysis: Once CST dues were held not to be secured debt, the challenge to the resolution plan on that footing could not succeed. The approval of the plan was not shown to violate Section 30(2) of the Insolvency and Bankruptcy Code, 2016. The Tribunal also noted that the argument based on earlier decisions concerning GVAT dues did not extend to CST dues in the absence of a corresponding charging provision.

Conclusion: No infirmity was found in the approval of the resolution plan.

Final Conclusion: The appeals failed because CST dues could not be elevated to secured status in the absence of a statutory first charge, and the resolution plan approval was left undisturbed.

Ratio Decidendi: A tax claim becomes a secured debt only when the governing statute creates a substantive security interest or first charge by operation of law; a provision conferring only procedural recovery powers does not, by itself, confer secured status.

Issues: (i) Whether the Adjudicating Authority retained jurisdiction to decide the pending application after approval of the resolution plan and substitution of the successful resolution applicant; (ii) Whether the Adjudicating Authority could examine the MoU and the parties' rights under section 60(5) of the Insolvency and Bankruptcy Code, 2016; (iii) Whether the appellant could claim protection under section 53A of the Transfer of Property Act, 1882 on the strength of the MoU and possession of the resort; (iv) Whether the direction to vacate and hand over possession was sustainable; (v) Whether the direction to pay usage charges was sustainable.

Issue (i): Whether the Adjudicating Authority retained jurisdiction to decide the pending application after approval of the resolution plan and substitution of the successful resolution applicant.

Analysis: The application was filed by the resolution professional before approval of the resolution plan and remained pending when the successful resolution applicant was substituted to prosecute it. The dispute concerned assets admittedly belonging to the corporate debtor, and the substitution did not extinguish the pending proceeding. The continuation of the application was therefore treated as part of the insolvency process and not as a fresh or independent dispute beyond the tribunal's authority.

Conclusion: The Adjudicating Authority retained jurisdiction and the application was competent to be decided after approval of the resolution plan.

Issue (ii): Whether the Adjudicating Authority could examine the MoU and the parties' rights under section 60(5) of the Insolvency and Bankruptcy Code, 2016.

Analysis: The application sought control and possession of an asset forming part of the corporate debtor's estate, and the defence was founded on an asserted MoU said to justify continued occupation. Since the controversy arose out of and in relation to the insolvency process, the tribunal was entitled to examine the asserted contractual basis to determine whether the appellant had any legally sustainable right to retain possession.

Conclusion: The Adjudicating Authority had jurisdiction under section 60(5) to examine the MoU and decide the dispute.

Issue (iii): Whether the appellant could claim protection under section 53A of the Transfer of Property Act, 1882 on the strength of the MoU and possession of the resort.

Analysis: The MoU was unregistered and was not shown to be a valid contract for sale. The statutory requirements for the protection of part performance were not met, particularly in view of the compulsory registration requirement for such contracts and the absence of a legally valid transfer arrangement. The appellant's continued possession, even if asserted, did not by itself create enforceable rights under section 53A.

Conclusion: The appellant was not entitled to the protection of section 53A of the Transfer of Property Act, 1882.

Issue (iv): Whether the direction to vacate and hand over possession was sustainable.

Analysis: Once the MoU failed to confer any enforceable possessory right, the appellant's occupation was treated as unauthorised against an asset belonging to the corporate debtor. In those circumstances, the resolution professional was entitled to recover possession for the estate, and the direction to vacate followed as a necessary consequence.

Conclusion: The direction to vacate and hand over possession was sustainable.

Issue (v): Whether the direction to pay usage charges was sustainable.

Analysis: Because the appellant's possession was not backed by any valid contractual or statutory entitlement, occupation of the property was treated as wrongful. In that situation, compensation for use and occupation was justified, and the tribunal was competent to direct determination and payment of fair usage charges.

Conclusion: The direction to pay usage charges was sustainable.

Final Conclusion: The appeal failed in entirety, and the tribunal upheld both recovery of possession and the monetary consequence flowing from unauthorised occupation.

Ratio Decidendi: A tribunal exercising insolvency jurisdiction may adjudicate a possession dispute relating to a corporate debtor's asset when the defence is founded on an asserted contractual right arising out of the insolvency process, but an unregistered MoU that is not a valid contract for sale cannot attract section 53A protection or defeat recovery of possession and consequential usage charges.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, under the statutory scheme of the Insolvency and Bankruptcy Code, the authority to select and appoint a liquidator upon commencement of liquidation lies with the committee of creditors or with the Adjudicating Authority.

1.2 How Sections 7, 9, 10, 16, 22, 27 and 34 of the Insolvency and Bankruptcy Code, read with Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016, allocate roles between the committee of creditors, the Board and the Adjudicating Authority in the appointment or replacement of the interim resolution professional, resolution professional and liquidator.

1.3 Whether the Adjudicating Authority possesses any independent or residual power to appoint or replace a resolution professional or liquidator in situations involving fraud, gross misconduct or collusion between the resolution professional/liquidator and the committee of creditors or stakeholders.

1.4 On the facts of the case, whether the Adjudicating Authority was justified in appointing liquidators of its own choice, disregarding the candidate proposed by the committee of creditors, and what directions ought to follow for appointment of the liquidator.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Allocation of authority between CoC and Adjudicating Authority for appointment/replacement of IRP, RP and liquidator under the IBC framework

Legal framework as discussed

2.1 The Court examined the scheme of the Insolvency and Bankruptcy Code from the stage of appointment of an interim resolution professional, referring specifically to Sections 7(3)(b), 9(4), 10, 16, 22, 27 and 34 of the Code, and to Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016.

2.2 Under Sections 7(3)(b), 9(4) and 10, the petitioner (financial creditor, operational creditor or corporate debtor, as the case may be) has the choice to recommend an interim resolution professional. Section 16 governs appointment of the interim resolution professional by the Adjudicating Authority, including cases where no interim resolution professional is proposed (Section 16(3)).

2.3 Section 22 empowers the committee of creditors to (a) confirm the interim resolution professional as resolution professional or (b) replace the interim resolution professional with another resolution professional of its choice, subject to written consent and confirmation by the Board.

2.4 Section 27 enables the committee of creditors to replace the resolution professional at any stage, by forwarding the name of another resolution professional with his written consent to the Adjudicating Authority for appointment, subject to confirmation by the Board; no reasons are required to be furnished for such replacement.

2.5 Section 34(1) provides that, upon passing an order for liquidation, "the resolution professional appointed for the corporate insolvency resolution process ... shall, subject to submission of a written consent ... act as the liquidator ... unless replaced by the Adjudicating Authority under sub-section (4)." Section 34(4)(c) refers, inter alia, to a situation where "the resolution professional fails to submit written consent under sub-section (1)."

2.6 Regulation 31A(11) of the IBBI (Liquidation Process) Regulations, 2016 provides that the consultation committee may, by majority, propose to replace the liquidator and shall apply to the Adjudicating Authority for such replacement after obtaining the written consent of the proposed liquidator.

Interpretation and reasoning

2.7 The Court drew a distinction between (i) selection of an insolvency professional (IRP/RP/liquidator) and (ii) formal appointment by the Adjudicating Authority. It held that the Code consciously separates the selection process from the act of appointment: selection is entrusted to the petitioning creditor/debtor or the committee of creditors (and in some cases to the Board), while the Adjudicating Authority is confined to making the formal appointment of the person so selected.

2.8 Analysing Sections 7, 9, 10 and 16, the Court observed that the Adjudicating Authority is nowhere given an independent authority to select an interim resolution professional of its own choice. Even when the recommended interim resolution professional faces disciplinary proceedings, the Code mandates dismissal of the petition or recourse to a recommendation from the Board, but does not authorise the Adjudicating Authority to choose an interim resolution professional independently.

2.9 From this scheme, the Court inferred a legislative intent to exclude the Adjudicating Authority from the selection process for the interim resolution professional and to deny it any veto over the petitioner's or the Board's choice, limiting its role to formal appointment of the professional so selected and approved.

2.10 At the next stage, under Section 22, the committee of creditors has the exclusive choice to either retain the interim resolution professional as resolution professional or to replace him with another resolution professional. The requirement of written consent of the proposed resolution professional and confirmation by the Board was characterised as procedural; the Adjudicating Authority neither participates in the selection nor overrides the committee of creditors' decision, save for an interim arrangement where the Board's confirmation is delayed.

2.11 Section 27 continues the same pattern: the committee of creditors alone chooses the replacement resolution professional; the Adjudicating Authority only appoints the professional so chosen, subject to confirmation by the Board. The Code does not require the committee of creditors to provide reasons for replacement, underscoring its primacy in the selection process.

2.12 Turning to Section 34(1) and Section 34(4)(c), the Court rejected the construction that the Adjudicating Authority has an exclusive power to select a liquidator whenever the existing resolution professional does not consent to act as liquidator. The Court emphasised that Section 34(1) merely provides that the resolution professional "shall ... act as the liquidator ... unless replaced by the Adjudicating Authority under sub-section (4)"; this language confers on the Adjudicating Authority a power of replacement, but not a power of initial selection contrary to the statutory scheme.

2.13 The Court held that "replacement of the resolution professional" in Section 34(1) read with Section 34(4)(c) must be understood in light of Section 27: the authority to select the replacement resolution professional (who may then act as liquidator) rests with the committee of creditors, while the Adjudicating Authority's role remains to formally appoint the person so selected after Board confirmation.

2.14 Any interpretation that would allow the Adjudicating Authority, in the specific situation where the existing resolution professional refuses consent to act as liquidator, to appoint a liquidator of its own choice, was considered anomalous and inconsistent with the broader legislative design which, at all other stages, denies the Adjudicating Authority an independent selecting role.

2.15 The Court accordingly read Section 34 harmoniously with Sections 22 and 27, holding that the Code does not carve out an exception at the liquidation stage to confer upon the Adjudicating Authority an overarching power to choose a liquidator in preference to the committee of creditors' nominee.

Conclusions on Issues 1 & 2

2.16 The authority to select and propose the person who will act as liquidator upon liquidation lies with the committee of creditors (by application of Section 27 procedures), and not with the Adjudicating Authority.

2.17 The Adjudicating Authority's power under Section 34(1) read with Section 34(4)(c) is confined to formally replacing and appointing the resolution professional/liquidator chosen in accordance with the statutory procedure; it does not include an independent power to select a liquidator of its own choice.

2.18 Regulation 31A(11) reinforces the position that stakeholder bodies (consultation committee/CoC) may propose replacement of a liquidator and that the Adjudicating Authority acts on such proposal; it does not vest any original power of selection in the Adjudicating Authority.

Issue 3: Residual or inherent power of Adjudicating Authority in cases of fraud, misconduct or collusion

Legal framework as discussed

3.1 The Court did not identify an express Code provision authorising the Adjudicating Authority to independently select a resolution professional or liquidator in situations of fraud or collusion. However, it considered the general principles flowing from the constitutional role of judicial fora and referred incidentally to Rule 11 of the NCLT and NCLAT Rules as reflecting inherent powers.

Interpretation and reasoning

3.2 The Court recognised that the IBC assigns a minimal and largely formal role to the Adjudicating Authority in the selection and appointment of insolvency professionals, but held that this does not denude the tribunal of its core judicial function to prevent abuse of process and "fraud on the statute."

3.3 It identified a "solitary circumstance" where the Adjudicating Authority may have to act independently of the committee of creditors or the stakeholders' consultation committee: where it has reason to believe, on the basis of tangible and incontrovertible facts, that the resolution professional or liquidator has committed gross misconduct, in connivance or collusion with the committee of creditors or consultation committee, thereby compromising the integrity of the resolution or liquidation process.

3.4 In such a scenario, the Court reasoned that it would be futile and contrary to the public interest for the Adjudicating Authority to rely on the same compromised bodies (CoC/SCC) to propose replacement, since their collusion is part of the mischief. To insist on their initiative would, in effect, compel the tribunal to remain a "mute spectator" to a fraud on the statute.

3.5 Drawing on constitutional and jurisprudential principles, and illustrative dicta from other jurisdictions and contexts, the Court affirmed that no judicial forum can justifiably abdicate its duty to intervene where procedural actors subvert statutory purpose through collusion or misconduct. The power to arrest statutory frauds is inherent in the judicial system and does not depend on express statutory conferment.

Conclusions on Issue 3

3.6 As a rule, the Adjudicating Authority has no original role in selecting a resolution professional or liquidator and must respect the choices made by the committee of creditors and confirmed by the Board, appointing them in terms of the Code.

3.7 Exceptionally, where there is credible and incontrovertible material of gross misconduct or fraud by the resolution professional or liquidator in collusion with the committee of creditors or consultation committee, the Adjudicating Authority may, in exercise of its inherent judicial powers, intervene independently to seek or effect replacement to safeguard the integrity of the process.

3.8 This exceptional power does not dilute the general statutory scheme; it operates only to prevent fraud on the statute and preserve public confidence in the insolvency framework.

Issue 4: Validity of the Adjudicating Authority's appointment of its own liquidators in the present case and consequential directions

Interpretation and reasoning

4.1 On the facts, the committee of creditors in both matters had resolved that the corporate debtor be liquidated and had proposed a particular entity as liquidator, which was not the then acting resolution professional.

4.2 The Adjudicating Authority nevertheless appointed, as liquidator, a different person (the second respondent in each appeal), who was neither the resolution professional appointed during the corporate insolvency resolution process nor the candidate chosen by the committee of creditors.

4.3 The liquidators appointed by the Adjudicating Authority argued that because the existing resolution professionals had not given written consent to act as liquidators under Section 34(1), the Adjudicating Authority had exclusive authority to appoint replacements under Section 34(4)(c), and that neither the committee of creditors nor the stakeholders' consultation committee had any role in appointing a liquidator.

4.4 Applying its interpretation of Sections 27 and 34, the Court rejected this contention. It held that even where the existing resolution professional does not consent to act as liquidator, the selection of a replacement resolution professional (who will function as liquidator) remains with the committee of creditors; the Adjudicating Authority cannot bypass the committee's choice and unilaterally appoint a liquidator of its own preference.

4.5 The Court noted the appellant's explanation that the committee of creditors had initially chosen a person other than the then resolution professional as liquidator in the backdrop of an IBBI circular dated 18.07.2023, which required that the resolution professional and liquidator not be the same. Subsequent to the Tribunal's decision in another matter holding that the IBBI could not override Section 34 by such a circular, the basis for insisting on a different liquidator no longer persisted.

4.6 Although the minutes of the meetings in which the resolution professional was replaced did not explicitly record the IBBI circular or the unwillingness of the erstwhile resolution professional, the Court held that this omission did not bar it from recognising the committee of creditors' present choice of liquidator. It reiterated that the right to replace, for the purposes of Section 34(1), lies with the committee of creditors and that the procedure under Section 27 must be followed.

4.7 The Court clarified that the entity chosen by the committee of creditors as liquidator must first be appointed (or recognised) as resolution professional in the manner contemplated by Section 27 and its nomination confirmed by the Board. Upon such confirmation, that entity would then, under Section 34(1), act as liquidator, and the Adjudicating Authority would be obliged to appoint it as such.

Conclusions on Issue 4

4.8 The Adjudicating Authority acted beyond its jurisdiction in appointing liquidators of its own choice and in disregarding the candidate nominated by the committee of creditors; it misapplied Section 34(1) read with Section 34(4)(c) by treating itself as the primary selecting authority for the liquidator.

4.9 The authority to select the replacement resolution professional, who would then act as liquidator under Section 34(1), rests with the committee of creditors, and the Adjudicating Authority's role is limited to formal appointment of that person after confirmation by the Board.

4.10 The orders of the Adjudicating Authority appointing its own nominees as liquidators stand set aside. Upon confirmation by the Board of the entity chosen by the committee of creditors, the Adjudicating Authority is required to appoint that entity as the liquidator in accordance with the Code.

Issues: (i) Whether the termination of the development agreement and supplementary agreements by the society prior to the second CIRP was valid and effective in law; (ii) Whether those agreements constituted assets or property of the corporate debtor so as to attract the moratorium under Section 14 of the IBC; (iii) Whether the High Court was justified in entertaining the writ petition and directing the authorities to process approvals for the new developer; (iv) Whether the High Court proceedings were vitiated by violation of natural justice.

Issue (i): Whether the termination of the development agreement and supplementary agreements by the society prior to the second CIRP was valid and effective in law.

Analysis: The agreements were found to be terminable for persistent and prolonged default by the developer. The record showed repeated notices, failure to complete redevelopment within the stipulated time, and non-performance of core obligations such as payment of transit rent and commencement of work. The termination notices were issued before the second CIRP commenced and were not shown to be motivated by insolvency. The Court further held that the redevelopment arrangement did not create a proprietary interest in favour of the developer; at best, it conferred a limited licence to enter and use the property for redevelopment. Since the society retained possession and ownership throughout, the contractual relationship did not survive as an enforceable development right on the insolvency commencement date.

Conclusion: The termination was valid, lawful, and effective in law; no subsisting right survived in favour of the corporate debtor.

Issue (ii): Whether the development agreement and the supplementary agreements constituted assets or property of the corporate debtor so as to attract the moratorium under Section 14 of the IBC.

Analysis: The protection of moratorium extends only to existing, enforceable rights forming part of the corporate debtor's estate. A terminated agreement, especially one ended prior to CIRP for default unrelated to insolvency, does not revive by operation of Section 14. The Court held that the developer never obtained actual or constructive possession, and the agreements did not confer any proprietary, possessory, or ownership-like interest. In the absence of a subsisting interest, the agreements could not be treated as assets or property within the meaning of the Code. The moratorium could not be used to resurrect extinguished contractual rights.

Conclusion: The agreements did not constitute assets or property of the corporate debtor and were not protected by Section 14.

Issue (iii): Whether the High Court was justified in entertaining the writ petition and directing the authorities to process approvals for the new developer.

Analysis: The writ petition concerned the society's request that statutory authorities process redevelopment approvals after the earlier agreement had been validly terminated. The directions were confined to public authorities acting in their statutory domain and did not amount to adjudication of private contractual rights by the High Court. The Court held that constitutional judicial review under Article 226 remains available in the public law sphere and is not ousted by the IBC where no subsisting right of the corporate debtor survives. Since the High Court's order merely required consideration and processing of the proposal in accordance with law, it did not trench upon the insolvency forum's jurisdiction or violate the moratorium.

Conclusion: The High Court was justified in entertaining the writ petition and issuing the directions granted.

Issue (iv): Whether the High Court proceedings were vitiated by violation of natural justice.

Analysis: The appellants were represented before the High Court, had notice of the proceedings, and did not seek time to file a reply or show any concrete prejudice. The Court held that natural justice is flexible and context-dependent, and that no denial of a fair hearing was established on the facts. The questions decided were primarily legal and based on undisputed documents. In the absence of demonstrated prejudice, the complaint of procedural unfairness was rejected.

Conclusion: The proceedings were not vitiated by violation of natural justice.

Final Conclusion: The appeal failed in full, the High Court's directions were sustained, and the redevelopment proposal was permitted to proceed in accordance with law.

Ratio Decidendi: A lawfully terminated redevelopment agreement, ended before commencement of CIRP for defaults unrelated to insolvency, does not remain an asset or property of the corporate debtor, and Section 14 of the IBC cannot be invoked to revive extinguished contractual rights or prevent statutory authorities from processing redevelopment permissions in the public law domain.

Issues: (i) Whether the appellant was denied a fair opportunity of hearing, warranting recall or interference on grounds of natural justice; (ii) Whether Section 66(1) of the Insolvency and Bankruptcy Code, 2016 operates independently of Section 66(2), and whether the facts established fraudulent trading justifying contribution.

Issue (i): Whether the appellant was denied a fair opportunity of hearing, warranting recall or interference on grounds of natural justice.

Analysis: Repeated opportunities had been afforded before the adjudicating authority, and the record showed that the appellant had participated in the proceedings at multiple stages. The plea of non-appearance and inability to file written submissions was found to be insufficient, especially in view of the repeated adjournments and the recording of submissions in the impugned order. The record did not establish any procedural unfairness that would justify recall or vitiate the order.

Conclusion: The plea of violation of natural justice was rejected and is against the appellant.

Issue (ii): Whether Section 66(1) of the Insolvency and Bankruptcy Code, 2016 operates independently of Section 66(2), and whether the facts established fraudulent trading justifying contribution.

Analysis: Section 66(1) and Section 66(2) were treated as distinct and independently workable provisions, with Section 67 reflecting that orders may be passed under either sub-section. The disjunctive structure of the provision was held to mean that Section 66(1) could be invoked without importing the conditions of Section 66(2). On the facts, the corporate debtor had purchased shares of a related party at a substantially higher value and later sold them at a much lower value to the appellant, resulting in substantial loss. This conduct was found to establish that the business had been carried on with intent to defraud creditors, attracting Section 66(1).

Conclusion: Section 66(1) was held to be independently invocable, and the finding of fraudulent trading and liability to contribute was upheld against the appellant.

Final Conclusion: The challenge to the order directing contribution failed, and the impugned findings were sustained in full.

Ratio Decidendi: Section 66(1) of the Insolvency and Bankruptcy Code, 2016 is a standalone fraudulent trading provision that can be invoked on proof that the corporate debtor's business was carried on with intent to defraud creditors, without importing the separate conditions governing Section 66(2).

ISSUES PRESENTED AND CONSIDERED

1. Whether erstwhile promoters (personal guarantors/directors) are "persons aggrieved" entitled to file appeals under Section 62 of the IBC in relation to approval/implementation of a resolution plan.

2. Whether the Committee of Creditors (CoC) becomes functus officio on approval of a resolution plan by the Adjudicating Authority, or continues to have power to act (including constituting / operating a monitoring committee) until plan implementation or liquidation.

3. Whether a resolution plan clause permitting extension of the implementation period by a 66% majority of lenders is impermissibly open-ended or contrary to the IBC's time-bound scheme.

4. Whether delay in implementation of the approved resolution plan (approx. 18 months) justified setting aside the plan or attracting interest/liability on the successful resolution applicant.

5. Whether payments made to financial creditors before operational creditors (and related treatment of ex-gratia payments to OCs) contravened Regulation 38 of the IBBI (CIRP) Regulations as applicable at relevant times.

6. Whether instruments issued as compulsorily convertible debentures (CCDs) can be treated as equity to satisfy "upfront infusion" commitments in a resolution plan.

7. Whether EBITDA (profits generated during CIRP) earned by the corporate debtor during the CIRP is distributable to creditors notwithstanding silence of the RfRP / resolution plan, and whether lenders/CoC can raise entitlement to EBITDA after plan approval.

8. Whether reclassification of a large operational creditor's admitted claim as "contingent" (with lower payout) was impermissible and vulnerable to challenge.

9. Whether payments characterized as pre-CIRP dues (to incentivize continued services) but later reclassified as CIRP-period payments can sustain appeals for additional relief.

ISSUE-WISE DETAILED ANALYSIS

1. Locus of erstwhile promoters to file appeals under Section 62

Legal framework: Section 62 permits appeals to the Supreme Court by any "person aggrieved" from NCLAT orders; IBC's objectives and provisions (Preamble, Sections 12, 20, 21, 30, 60) inform the scope of 'person aggrieved'.

Precedent treatment: Prior decisions have recognized that guarantors/erstwhile board members may be "persons aggrieved" where resolution plans affect their rights; authorities cited emphasize purposive interpretation aligned with IBC objectives.

Interpretation and reasoning: The Court held that promoters who are personal guarantors and whose rights are vitally affected by a resolution plan fall within "persons aggrieved". Rather than non-suiting on locus, the Court proceeded to decide the appeals on merits while noting promoters' conduct during CIRP.

Ratio vs. Obiter: Ratio - personal guarantors/erstwhile board members can be persons aggrieved if the plan impacts their rights; Court retains discretion to decide merits notwithstanding locus contentions.

Conclusion: Promoters had maintainable locus; however, their dilatory conduct during CIRP was recorded and relevant to merits.

2. Continuity and powers of the CoC after plan approval

Legal framework: Sections 21, 24, 28, 30 of IBC; Regulation 18 and Regulation 38 of IBBI (CIRP) Regulations (including later amendments and Explanation to Reg.18(2)); statutory duty to monitor implementation.

Precedent treatment: The statutory scheme contemplates CoC involvement during CIRP and provides for monitoring mechanisms; later regulatory amendments made consideration/constitution of monitoring committee mandatory.

Interpretation and reasoning: The Court rejected the functus officio argument. Explanation to Reg.18(2) and Reg.38 reflect legislative intent that CoC may continue to convene meetings and supervise implementation until plan is implemented or liquidation ordered. Allowing CoC to act post-approval avoids lacunae and ensures creditors' interests are protected while appeals or implementation issues remain pending.

Ratio vs. Obiter: Ratio - CoC continues in existence and retains power (including to constitute/operate a monitoring committee) until either implementation of the resolution plan or an order for liquidation under Section 33; CoC decisions on implementation fall within commercial wisdom.

Conclusion: CoC does not become functus officio on approval; its continuing interest justifies post-approval actions to supervise/enable implementation.

3. Legality of clause permitting CoC to extend implementation period by 66% majority

Legal framework: Section 12 (strict timelines and limited extensions), Section 30 (content of resolution plan), Regulation 38; jurisprudence disallowing renegotiation of plans post-submission (Ebix, Amtek principles).

Precedent treatment: Courts have held that once a resolution plan is approved it cannot be renegotiated or altered; but distinctions drawn where clause reserves limited extension powers to CoC for effective implementation.

Interpretation and reasoning: Clause permitting CoC-approved extension of the effective date (by 66% majority) was not a modification of the plan's substantive terms but a reservation of a limited administrative discretion to extend the implementation timeframe to address exigencies. It neither allowed renegotiation nor withdrawal of the plan.

Ratio vs. Obiter: Ratio - a clause permitting limited, creditor-approved extension of implementation does not, by itself, render a plan indeterminate or unlawful; such administrative extensions are permissible provided they do not alter substantive commitments of the plan.

Conclusion: Clause was valid; differentiation made from impermissible renegotiation decisions (Amtek) where substantive terms were sought to be altered.

4. Delay in implementation - whether it vitiates the plan

Legal framework: Section 12 time limits; consequences of prolonged non-implementation in precedent (Murari Lal Jalan); equitable considerations where external impediments intervene.

Precedent treatment: Delays attributable to the successful resolution applicant have led to plan rejection; but delays caused by external impediments or stays require contextual assessment.

Interpretation and reasoning: The Court traced facts showing multiple external impediments (criminal/FIR/ED provisional attachment, stays by NCLAT, pendency of challenges, need for clarity on Section 32A, interlocutory orders from this Court) impeded implementation. CoC and SRA acted jointly to secure handover of unencumbered assets; CoC passed a resolution to extend the effective date and the plan was implemented thereafter. Hence delay was not attributable to SRA alone nor was it inordinate in the sense warranting rejection.

Ratio vs. Obiter: Ratio - implementation delay does not automatically vitiate an approved plan where delay arises from legitimate, external impediments and creditors (CoC) exercise commercial judgment to permit extension and implementation.

Conclusion: Delay did not justify setting aside the plan or imposing consequences on SRA where credible external causes existed and CoC approved extension.

5. Priority of payments to Operational Creditors (OCs) vs Financial Creditors (FCs)

Legal framework: Regulation 38(1)(b) (original and subsequent amendments dated October and November 2018/2019) prescribing priority/payments to OCs; Section 30(2)(b) and later amendments; non-retrospective application of subsequent regulatory changes.

Precedent treatment: Statutory text and Board regulations govern mandatory contents; retrospective application requires explicit intent.

Interpretation and reasoning: At the time the resolution plan (with addendum) was approved by NCLT (5 Sept 2019), the earlier formulation governed and the plan stated liquidation value to OCs was nil but an ex-gratia payment was proposed. Subsequent Regulation amendment (27 Nov 2019) post-dates NCLT approval and cannot be applied retrospectively. The ex-gratia payments to OCs were not "amounts due" under the plan and therefore did not contravene the law as it stood on approval date.

Ratio vs. Obiter: Ratio - later regulatory amendments cannot be applied retrospectively to invalidate an approved plan; ex-gratia payments not forming part of amounts due under an approved plan do not automatically violate Regulation 38 as it then stood.

Conclusion: No contravention established on payments ordering; objection by promoters on this ground rejected.

6. Treating CCDs as equity to satisfy upfront infusion commitments

Legal framework: Principles distinguishing CCDs from debt under company law and prior precedent treating compulsorily convertible instruments as equity for relevant purposes.

Precedent treatment: Earlier authoritative rulings hold CCDs to be akin to equity where conversion is compulsory and no repayment obligation exists.

Interpretation and reasoning: The CCDs issued (five-year term with mandatory conversion) met the tests in precedent and CoC recorded approval/acceptance of CCD issuance as satisfying upfront infusion. Given settled jurisprudence and CoC's commercial wisdom, CCDs qualify as equity infusion for resolution plan compliance.

Ratio vs. Obiter: Ratio - compulsorily convertible debentures, mandatorily convertible into equity, are to be treated as equity instruments for purposes of fulfilling an upfront equity infusion commitment in a resolution plan.

Conclusion: CCDs satisfied the upfront infusion obligation; appellants' challenge rejected.

7. Entitlement and distribution of EBITDA generated during CIRP

Legal framework: Section 25 (RfRP), Section 30/31 (resolution plan content/finality), relevant precedents on distribution of profits/EBITDA, and doctrine that claims outside approved plan stand frozen.

Precedent treatment: Supreme Court authority (Essar) held that a successful resolution applicant cannot be faced with "undecided" claims post-approval and that distribution of profits during CIRP is governed by the RfRP/process document; NCLAT decisions to the contrary were set aside.

Interpretation and reasoning: The RfRP and resolution plan were silent on EBITDA distribution; CoC earlier (post-NCLAT) resolved that EBITDA remain with the company in line with the controlling Supreme Court precedent. The CoC and parties had taken a consistent stand before courts; later attempts by CoC/promoters to reopen entitlement to EBITDA after plan approval/review petitions were rejected as inconsistent and undermining the finality and commercial predictability of the resolution process. Reopening such claims would contravene the "frozen claims" doctrine and permit hydra-head claims.

Ratio vs. Obiter: Ratio - EBITDA distribution cannot be compelled where RfRP/resolution plan is silent and the successful resolution applicant relied on the process documents; claims not part of RfRP/resolution plan stand frozen post-approval and cannot be reopened except as provided by statute.

Conclusion: No entitlement of lenders/promoters to EBITDA where process documents are silent; attempts to revive such claims at this stage dismissed.

8. Classification of a creditor's admitted claim as "contingent" (re Jaldhi)

Legal framework: Admission of claims by resolution professional, CoC's power to accept/classify and sanction plan under commercial wisdom principles; enforcement of foreign awards under Arbitration Act requires domestic enforceability.

Precedent treatment: CoC's commercial decisions on classification/valuation of claims are protected from judicial interference (K. Sashidhar and successors).

Interpretation and reasoning: The creditor had adopted inconsistent positions before forums (earlier treating claim as contingent and later seeking crystallization). Enforcement of foreign arbitral awards in India requires domestic enforcement proceedings; the creditor had withdrawn enforcement proceedings before domestic court, undermining crystallization argument. CoC's decision to treat the claim as contingent formed part of its commercial assessment and was approved by CoC; such classification is non-justiciable absent statutory grounds under Section 61.

Ratio vs. Obiter: Ratio - reclassification/valuation of claims by CoC (including treatment of contingent vs crystallized) falls within CoC's commercial domain and is not to be upset unless statutory grounds for interference exist.

Conclusion: Classification as contingent was sustainable; appeal on this ground dismissed.

9. Pre-CIRP dues alleged to have been paid as incentive to continue services (Medi/Darcl)

Legal framework: RP's duty to manage operations (Sections 14, 20, 23, 25), RP's accounting/approval obligations, and requirement that payments must conform to resolution plan and CoC approvals.

Precedent treatment: Payments of pre-CIRP dues require express CoC approval or plan provision; inadvertent payments corrected/adjusted have limited remedial scope.

Interpretation and reasoning: Record showed payments were made and subsequently treated as an accountancy mistake; RP rectified by adjusting payments against CIRP-period dues and there was no CoC approval for pre-CIRP payments nor plan provision. NCLT/NCLAT findings on same were concurrent and not susceptible to interference.

Ratio vs. Obiter: Ratio - isolated/erroneous pre-CIRP payments not approved by CoC and not incorporated in resolution plan do not give rise to new legal questions warranting reversal.

Conclusion: Appeals regarding pre-CIRP payment recharacterization failed; no interference warranted.

OVERALL CONCLUSION

The Court upheld the finality and commercial sanctity of the approved resolution plan subject to statutory limits: promoters had locus but their challenges failed on merits; CoC retains supervisory role post-approval until implementation/liquidation; limited creditor-approved extensions of implementation are permissible; delays attributable to external impediments did not vitiate the plan; CCDs qualifying as compulsorily convertible instruments constitute equity for infusion commitments; EBITDA claims could not be reopened where RfRP/resolution plan are silent; creditor classification and RP accounting adjustments fell within commercial/administrative domain and did not warrant setting aside the plan. The impugned appellate order was therefore upheld and the appeals dismissed.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the impugned share purchase transactions constituted "fraudulent trading" or "wrongful trading" within the meaning of Section 66 of the Insolvency and Bankruptcy Code, 2016.

1.2 Whether the statutory ingredients of Section 66(2) - knowledge of inevitable insolvency and lack of due diligence in minimising potential loss to creditors - were established on the material relied upon, particularly the transaction audit report.

1.3 Whether a commercial investment decision by directors, which subsequently results in loss or reduced value, can by itself justify a direction to contribute to the assets of the corporate debtor under Section 66 of the Insolvency and Bankruptcy Code, 2016.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Characterisation of the impugned transactions under Section 66 of the Insolvency and Bankruptcy Code, 2016

Legal framework

2.1 The Court reproduced and analysed Section 66 of the Insolvency and Bankruptcy Code, 2016, emphasising:

(a) Under Section 66(1), liability arises if the business of the corporate debtor is carried on "with intent to defraud creditors" or "for any fraudulent purpose".

(b) Under Section 66(2), a director is liable to contribute if, before the insolvency commencement date: (i) the director knew or ought to have known that there was no reasonable prospect of avoiding the commencement of corporate insolvency resolution process; and (ii) such director did not exercise due diligence in minimising potential loss to creditors.

(c) The explanation deems due diligence to be exercised if such diligence was reasonably expected of a person carrying out the same functions.

2.2 The Court referred to prior appellate decisions interpreting Section 66, noting in particular:

(a) Fraudulent trading requires a "very high degree of proof" tied to fraudulent intent, to be established on a preponderance of probability with compelling material.

(b) Bona fide belief of directors that the company would recover from financial difficulty may negate fraudulent trading.

(c) "Dishonesty" is an essential ingredient of fraudulent trading and cannot be inferred lightly; the intent to defraud is to be judged by its effect.

(d) For Section 66(2), there must be proof that directors continued business despite knowing likely insolvency, and that they failed to exercise due diligence to minimise loss to creditors.

Interpretation and reasoning

2.3 The impugned transactions related to purchase of equity shares of two companies whose shares were not actively traded at the time of purchase, and which were acquired from one of the unsecured creditors.

2.4 The adjudicating authority had inferred fraud primarily because:

(a) The shares were non-traded/unlisted when purchased; and

(b) The application for commencement of CIRP was filed within seven months of these purchases; and

(c) It concluded that investment in non-traded shares created illiquidity and indicated lack of due diligence.

2.5 The Court examined the financial position and creditor structure as reflected in the minutes of the stakeholders' consultation committee. The total admitted unsecured financial debt was approximately Rs. 41 lakhs, out of which Rs. 15,27,161/- stood in the name of the same entity from whom the shares were purchased.

2.6 The Court noted that the share purchase transactions were done with one of the unsecured creditors, and only part consideration of Rs. 15 lakhs out of Rs. 28.50 lakhs was paid. It held that such a structure, involving a creditor as seller and partial payment, "excludes the possibility" of the transactions having been undertaken to the detriment of creditors as a class.

2.7 The Court further noted that the shares continued as assets of the corporate debtor, and that during CIRP/liquidation an offer of Rs. 15 lakhs was received for these shares. This indicated that:

(a) The investment remained an asset and was not rendered worthless; and

(b) At least the amount actually paid (Rs. 15 lakhs) could be substantially recovered, negating any clear loss to the corporate debtor on these transactions.

2.8 The Court emphasised that to brand the transactions as fraudulent under Section 66, it must be shown that:

(a) The business of the corporate debtor was carried on with intent to defraud creditors or for a fraudulent purpose; and

(b) Before the insolvency commencement date the directors knew or ought to have known that there was no reasonable prospect of avoiding CIRP; and

(c) They did not exercise due diligence in minimising potential loss to creditors.

2.9 On the facts, the Court found no direct evidence that, at the time of purchasing the shares, the directors knew that the commencement of CIRP was inevitable or that the transactions were structured to defeat creditors' interests. The proximity of the purchase dates to the CIRP filing, by itself, was held insufficient to infer fraudulent intent or knowledge.

Conclusions

2.10 The impugned share purchase transactions did not satisfy the legal requirements of "fraudulent trading" under Section 66(1) or "wrongful trading" under Section 66(2). The necessary elements of intent to defraud and knowledge of unavoidable insolvency, coupled with lack of due diligence, were not established.

Issue 2 - Standard of proof, role of the transaction audit report, and satisfaction of Section 66(2) requirements

Legal framework

2.11 Relying on prior appellate precedent, the Court reiterated:

(a) Fraudulent trading under Section 66 requires a high standard of proof, though on a civil standard of preponderance of probabilities.

(b) Material relied upon must be compelling enough to satisfy the adjudicatory conscience.

(c) Section 66(1) and Section 66(2) operate in distinct fields, and the specific ingredients of each must independently be pleaded and proved.

2.12 Under Section 66(2), both conditions in clauses (a) and (b) are conjunctive and must co-exist: knowledge (or deemed knowledge) of no reasonable prospect of avoiding CIRP, and failure to exercise due diligence in minimising potential loss to creditors.

Interpretation and reasoning

2.13 The adjudicating authority had principally relied upon the transaction audit report to infer absence of due diligence and to draw an adverse conclusion under Section 66.

2.14 The Court observed that the transaction audit report recorded, inter alia, that:

(a) The shares purchased were not actively traded, with last trade dates several years prior to purchase.

(b) No demat account was used, and no sale/purchase agreement or valuation report was furnished.

(c) These two scrips constituted the only stock-in-trade investments of the corporate debtor.

(d) No documented due diligence or valuation was carried out prior to investment.

2.15 The Court held that such observations, even if accepted, go only to the question of quality of commercial judgment or procedural diligence, but do not by themselves demonstrate:

(a) Fraudulent intent to defraud creditors; or

(b) Conscious knowledge that CIRP was unavoidable at the time of the transactions; or

(c) Any concrete, quantified loss to the creditors resulting from the transactions, particularly when the investment remained an asset capable of realisation.

2.16 The Court expressly held that:

(a) A transaction audit report is not a "conclusive piece of evidence"; and

(b) The adjudicating authority erred in treating the audit findings as sufficient, without examining the broader commercial context and without corroborative material establishing the core ingredients of Section 66.

2.17 The Court underscored that non-exercise or imperfect exercise of due diligence alone "may perhaps be not sufficient" to label a transaction as fraudulent under Section 66(2). The statutory scheme requires both knowledge of inevitable CIRP and lack of due diligence in minimising loss; absence of either is fatal to the claim.

2.18 Examining the surrounding circumstances, including:

(a) The limited overall unsecured debt (about Rs. 41 lakhs);

(b) The fact that the seller of the shares was itself an unsecured creditor of the corporate debtor;

(c) The partial payment of consideration (Rs. 15 lakhs paid out of Rs. 28.50 lakhs);

(d) The continuing value of the shares and the offer of Rs. 15 lakhs received during CIRP/liquidation;

the Court found that there was no demonstrable diversion or depletion of assets designed to prejudice creditors.

Conclusions

2.19 The material placed on record, including the transaction audit report, did not meet the high standard required to prove fraudulent or wrongful trading under Section 66.

2.20 The essential conjunctive requirements under Section 66(2)(a) and (b) - knowledge of no reasonable prospect of avoiding CIRP and failure to exercise due diligence in minimising creditor loss - were not established against the directors.

2.21 The adjudicating authority erred in relying solely and conclusively on the transaction audit report, without proper examination of commercial context and without additional substantive evidence of fraudulent intent or wrongful trading.

Issue 3 - Treatment of commercial decisions and business risk under Section 66

Interpretation and reasoning

2.22 The Court accepted that the corporate debtor was engaged in financial intermediation as its core business and that the impugned transactions were investment decisions taken in that context.

2.23 It noted the directors' explanation that the shares were purchased in the expectation that the companies would regularise compliances, be actively traded, and yield appreciation, and that there are instances of delisted companies being relisted and generating high returns.

2.24 The Court reiterated, in line with earlier appellate authority, that:

(a) Not every commercial decision resulting in loss is fraudulent;

(b) Business necessarily entails risk; and

(c) Each commercial transaction that leads to loss cannot automatically be labelled as fraudulent or as undertaken to deceive creditors.

2.25 It found that in the instant matter, the investment in shares:

(a) Remained on the balance sheet as the sole asset of the corporate debtor;

(b) Attracted an offer of Rs. 15 lakhs during CIRP/liquidation; and

(c) Therefore could not be said to have caused a loss to the corporate debtor or its creditors in the requisite sense under Section 66.

2.26 The Court considered the fact that had the directors' intent been to defraud, they might have structured the transaction differently (for example, by fully paying and siphoning out the full purchase value), whereas here only part payment was made and the asset remained with the corporate debtor.

Conclusions

2.27 A bona fide commercial decision involving investment risk, even if it results in loss or reduced value, does not by itself attract Section 66 in the absence of demonstrated fraudulent intent, knowledge of unavoidable insolvency, and lack of due diligence aimed at minimising loss.

2.28 The impugned investments were commercial decisions which, viewed in the "broad spectrum of commercial wisdom", could not be treated as fraudulent or wrongful trading so as to justify a contribution order under Section 66.

2.29 Consequently, the direction to contribute Rs. 28,50,000/- to the liquidation estate was unsustainable, and the impugned order was set aside.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the impugned transactions identified by the liquidator (cash withdrawals, diversions from bank accounts, opening of new accounts in similar name, and sale of vehicle) constituted "fraudulent transactions" attracting liability under Section 66 of the Insolvency and Bankruptcy Code, 2016.

1.2 Whether suspended directors are entitled, during the pendency of CIRP, to carry on business through a partnership in the same line and operate bank accounts in a name identical or deceptively similar to that of the corporate debtor, without such conduct amounting to diversion of receivables or fraudulent trading.

1.3 Whether the liquidator was required in law to conduct a forensic audit before seeking relief under Section 66 of the Insolvency and Bankruptcy Code, 2016, and whether absence of such an audit vitiated the finding of fraudulent transactions.

1.4 Whether the impugned order of the Adjudicating Authority suffered from violation of principles of natural justice, including alleged denial of adequate opportunity, non-consideration of defence, and being a non-speaking order.

1.5 Whether additional documents/evidence sought to be produced for the first time before the Appellate Tribunal could be admitted under the principles of Order XLI Rule 27 CPC, read with Section 424 of the Companies Act, 2013.

1.6 Whether the precedent relied upon by the appellants regarding Section 66 (Jayesh Sanghrajka v. Divine Investments) governed the present case and mandated a different outcome.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 & 2: Fraudulent transactions under Section 66 IBC and permissibility of parallel business/identical accounts during CIRP

(a) Legal framework as discussed

2.1 The application before the Adjudicating Authority was filed under Section 66(1) and Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the NCLT Rules, 2016, alleging that the business of the corporate debtor was conducted with intent to defraud creditors and that certain transactions were fraudulent.

2.2 The Tribunal referred to the concept of PUFE (Preferential, Undervalued, Fraudulent and Extortionate) transactions and recognised that the Code and Regulations cast the duty on the resolution professional/liquidator to form an opinion on existence of such transactions.

(b) Interpretation and reasoning

2.3 The liquidator, after verifying accounts, auditor's report, bank statements and customer information, identified five categories of suspect transactions: (i) diversion of funds from corporate debtor's bank account without explanation or vouchers; (ii) substantial cash withdrawals without justification; (iii) collections and withdrawals through an Axis Bank account opened in the name "Axiomata Elevators" as a partnership of the appellants; (iv) similar collections and withdrawals through a People's Urban Cooperative Bank account in the same name and partnership; and (v) proceeds of sale of a car of the corporate debtor not reflected in its accounts and misrepresented as scrap sale.

2.4 The Adjudicating Authority had found that the appellants opened unauthorised bank accounts after commencement of CIRP in names identical to that of the corporate debtor, using the PAN of the corporate debtor and false address, collected money from existing customers of the corporate debtor, withdrew the amounts in cash, and closed the accounts. These facts were traced through the 26AS statement and other materials.

2.5 The Appellate Tribunal noted that the appellants failed, both before the liquidator and before the Adjudicating Authority, to furnish vouchers, ledgers, or supporting documents demonstrating that the questioned payments and withdrawals were for the bona fide business of the corporate debtor, and that no explanation was given as to use of such funds for the corporate debtor's purposes.

2.6 The appellants' contention that they were entitled to run a partnership business in the same line during CIRP and that such activity could not affect the corporate debtor's business was rejected de facto: the material showed that the new accounts were deliberately used to receive payments intended for the corporate debtor from its existing customers, with TDS being credited under the PAN of the corporate debtor, demonstrating that such receipts belonged to the corporate debtor and were diverted.

2.7 The Tribunal further treated the dubious sale of the vehicle, non-disclosure of sale proceeds, misrepresentation to the former RP that the vehicle had been scrapped, removal of files and attempt to break open the lock of the corporate debtor's office as conduct corroborating a fraudulent intent.

2.8 It was emphasised that the appellants had been given opportunity by the liquidator (including an email request for information and documents) and yet chose not to cooperate, not to provide any clarificatory material, and later filed only a brief reply before the Adjudicating Authority without supporting documents or satisfactory explanation.

(c) Conclusions

2.9 The Tribunal affirmed the finding that the appellants had carried out transactions with intent to defraud the creditors, by diverting receivables and depleting assets of the corporate debtor through unexplained withdrawals, unauthorised bank accounts in an identical name, and misappropriation of sale proceeds of the vehicle.

2.10 The conduct of the appellants in opening and operating partnership bank accounts in a name identical to the corporate debtor, using its PAN and receiving payments from its existing customers during CIRP, was held to constitute fraudulent transactions under Section 66 and not a permissible independent business activity.

2.11 The decision of the Adjudicating Authority directing the appellants to pay the quantified amount to the liquidation estate, jointly and severally, was upheld.

Issue 3: Necessity of forensic audit for proceedings under Section 66 IBC

(a) Legal framework as discussed

3.1 The appellants relied on an NCLT order (Jayesh Sanghrajka v. Divine Investments) to contend that forensic audit is necessary to determine fraudulent transactions under Section 66.

3.2 The Tribunal examined the scheme of the Code and Regulations which impose a duty on the resolution professional/liquidator to form an opinion on existence of PUFE transactions based on available material.

(b) Interpretation and reasoning

3.3 The Tribunal held that there is no mandatory requirement under the Insolvency and Bankruptcy Code or the Regulations to appoint a forensic auditor in order to invoke Section 66.

3.4 It accepted the respondent's submission that when the liquidator, on the basis of documentary evidence (bank statements, auditor's report, customer confirmations, tax statements) is able to clearly determine the existence of fraudulent transactions, recourse to forensic audit is not a statutory precondition.

3.5 The Tribunal distinguished the precedent relied on by the appellants as not laying down a general rule requiring forensic audit in every Section 66 proceeding and as inapplicable on its facts.

(c) Conclusions

3.6 The absence of a forensic audit did not vitiate the application under Section 66 nor the findings of fraudulent transactions; the liquidator's determination based on existing materials was legally sufficient.

Issue 4: Alleged violation of principles of natural justice and non-speaking order

(a) Legal framework as discussed

4.1 The appellants claimed violation of natural justice and relied on the requirement of reasoned orders as enunciated in judicial precedent (including reference to SN Mukherjee v. Union of India) to contend that the impugned order was non-speaking and that adequate opportunity was not granted.

(b) Interpretation and reasoning

4.2 The Tribunal perused the impugned order and noted that the Adjudicating Authority had gone into details of each set of transactions (sale of car, withdrawals, opening of new accounts and diversion of receipts) and recorded the submissions of the appellants as well as findings on each head.

4.3 It found no instance where the appellants had sought additional time before the Adjudicating Authority to produce documents which they later sought to rely on in appeal, nor any request for access to records of the corporate debtor to substantiate their defence.

4.4 The Tribunal also observed that the appellants did not explain or contest the serious factual observations of the Adjudicating Authority regarding removal of files and attempt to break open the office lock, nor challenge those findings in their pleadings in appeal.

4.5 It concluded that the appellants' plea of lack of opportunity was a bare assertion not supported by the record; they had chosen not to respond substantively to the liquidator's prior requests or to file comprehensive material before the Adjudicating Authority.

(c) Conclusions

4.6 The impugned order was held to be a reasoned and speaking order and not in violation of principles of natural justice.

4.7 No miscarriage of justice or denial of fair opportunity was established; consequently, there was no ground to set aside or remit the matter on this basis.

Issue 5: Admission of additional evidence at appellate stage (Order XLI Rule 27 CPC read with Section 424 Companies Act)

(a) Legal framework as discussed

5.1 The Tribunal expressly referred to Order XLI Rule 27 CPC as applicable by virtue of Section 424(2) of the Companies Act, 2013.

5.2 It recited the three recognised circumstances under which additional evidence may be admitted at the appellate stage:

(i) where the trial court refused to admit evidence which ought to have been admitted;

(ii) where the evidence was not available despite exercise of due diligence; and

(iii) where the appellate court requires such evidence to enable it to pronounce judgment or for other substantial cause.

5.3 The Tribunal relied on the decision in Union of India v. Ibrahim Uddin & Another, setting out the restrictions on admitting additional evidence and emphasising that:

- appellate courts ordinarily should not travel beyond the record;

- parties are not entitled, as of right, to adduce new evidence in appeal;

- additional evidence is not to be admitted to fill lacunae or provide a fresh opportunity where a party failed to discharge its onus at trial.

(b) Interpretation and reasoning

5.4 The documents sought to be introduced by the appellants in appeal (relating, inter alia, to vehicle sale, ledgers, bank extracts, financial statements, partnership documents) were found to be documents that were available to the appellants during the proceedings before the Adjudicating Authority.

5.5 The Tribunal held that there was no case that the Adjudicating Authority had refused to admit such documents, nor any satisfactory explanation that these documents could not be produced despite due diligence; rather, the appellants had simply not filed them earlier.

5.6 It further found that the appeal could be decided on the basis of the existing record and that the Tribunal did not require additional evidence to pronounce judgment. The attempt to bring in new documents was seen as an effort to cure earlier omissions and lacunae, which is impermissible under Order XLI Rule 27.

(c) Conclusions

5.7 The conditions under Order XLI Rule 27 CPC were not satisfied; the additional documents sought to be produced by the appellants in appeal were not admissible.

5.8 The Appellate Tribunal declined to entertain such documents and proceeded on the record that was before the Adjudicating Authority.

Issue 6: Applicability of precedent on Section 66 (Jayesh Sanghrajka v. Divine Investments)

(a) Legal framework as discussed

6.1 The appellants invoked an NCLT decision to argue that a forensic audit is necessary and that the liquidator bears a particular mode of proving fraudulent transactions under Section 66.

(b) Interpretation and reasoning

6.2 The Tribunal held that the ratio of the relied-upon decision could not be applied to the present case. Under Section 66, the onus is on the applicant to establish that the affairs of the corporate debtor were conducted with intent to defraud creditors or for fraudulent purposes, but the Code does not prescribe forensic audit as a mandatory means of proof.

6.3 It found that, in the present matter, the liquidator had, on the basis of contemporaneous documentary evidence and investigation, already established fraudulent transactions and the fraudulent intent of the appellants; the appellants had declined earlier opportunities to rebut or explain.

(c) Conclusions

6.4 The precedent cited by the appellants did not alter the legal position or assist them on the facts; it did not compel remand or negate the Section 66 findings.

6.5 The Tribunal upheld the Adjudicating Authority's application of Section 66 and dismissed the appeal as devoid of merit.

Issues: (i) Whether assessment proceedings under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 could be continued after commencement of moratorium under the Insolvency and Bankruptcy Code, 2016, and whether a claim based on such post-moratorium assessment could be admitted in the corporate insolvency resolution process. (ii) Whether an undertaking given by the successful resolution applicant to pay the provident fund claim could validate an otherwise unenforceable claim or bind the parties to payment.

Issue (i): Whether assessment proceedings under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 could be continued after commencement of moratorium under the Insolvency and Bankruptcy Code, 2016, and whether a claim based on such post-moratorium assessment could be admitted in the corporate insolvency resolution process.

Analysis: The moratorium under Section 14(1) creates a statutory freeze on proceedings against the corporate debtor. The expression "proceedings" is not confined to civil suits and extends to assessment proceedings which may affect the assets and liabilities of the corporate debtor. A claim founded on an assessment initiated or completed during the moratorium period is barred, because the very basis of liability is created in violation of the insolvency freeze. The provident fund demand in question rested on an assessment report prepared after commencement of the moratorium, and therefore the claim could not be treated as enforceable in the resolution process.

Conclusion: The claim based on post-moratorium assessment was not admissible, and the direction approving payment of the provident fund dues on that basis could not stand.

Issue (ii): Whether an undertaking given by the successful resolution applicant to pay the provident fund claim could validate an otherwise unenforceable claim or bind the parties to payment.

Analysis: An undertaking cannot override a statutory prohibition. If the underlying claim is hit by the moratorium and is unenforceable in law, an affidavit or undertaking to pay that claim does not cure the defect. A contractual or volunteered promise that conflicts with the statutory freeze is itself incapable of enforcement. The resolution applicant's affidavit therefore could not be used to sustain payment of the disputed provident fund amounts.

Conclusion: The undertaking was unenforceable and could not validate payment of the claim.

Final Conclusion: The appeal filed by the successful resolution applicant succeeded, the provident fund organisation's appeal failed, and the direction treating the disputed provident fund amounts as payable under the resolution plan was set aside.

Ratio Decidendi: Once moratorium under Section 14(1) of the Insolvency and Bankruptcy Code, 2016 commences, assessment proceedings creating liability against the corporate debtor cannot continue, and any claim founded on such prohibited assessment is unenforceable in the insolvency process; a contrary undertaking cannot revive it.

ISSUES PRESENTED AND CONSIDERED

1. Whether the applicants who entered into buy-back / investment-style Memoranda of Understanding for residential units qualify as "speculative investors" and are thereby disentitled from initiating proceedings under Section 7 of the Insolvency and Bankruptcy Code (IBC).

2. Whether the Ordinance / Amendment Act that introduced a threshold requirement (joint filing by not less than 100 allottees or 10% of allottees) for initiation of CIRP by allottees in a real estate project was applicable to pending Section 7 proceedings where orders had been reserved prior to promulgation, and if non-compliance could be cured subsequently in appellate proceedings.

ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Classification as "Speculative Investors"

Legal framework: The IBC and the definition of "financial creditor" (including allottees under Section 5(8)(f) as amended) must be read with the object of the Code - revival and restructuring, not a recovery mechanism for speculative investment contracts. RERA and consumer fora remain parallel remedies for individual grievances.

Precedent treatment: The Court follows and applies the distinction drawn in Pioneer Urban Land & Infrastructure Ltd v. Union of India between genuine homebuyers and speculative investors, and reiterates that speculative investors cannot misuse the Code to trigger CIRP. The reasoning in Pioneer Urban (para 56) shifting burden after prima facie default is adopted.

Interpretation and reasoning: The determination is fact-sensitive and contextual. Indicative factors include nature and terms of the contract, number of units, presence of assured returns or buy-back clauses, stage of project completion, and existence of alternative arrangements in lieu of possession. Possession is treated as the sine qua non of genuine homebuyer intent. Contracts that substitute possession with assured returns, buyback/refund options, unrealistic guaranteed yields, preferential contractual rights, or significant deviations from RERA model agreement point strongly to speculation. The Court draws on commercial notions of "speculation" (expectation of unusually large profits; business/trade activity) and analogies from older precedents requiring actual delivery to avoid classification as speculative.

Ratio vs. Obiter: The formulation of non-exhaustive indicators and the holding that possession is essential to genuine homebuyer status constitute ratio as applied to admissions under Section 7; discussion on sectoral harms and policy forms part of ratio guiding interpretation. Historical/cautionary references to broader social policy and housing as a right are obiterate contextual reinforcement but align with statutory objectives.

Conclusions: On the facts examined, where agreements were structured as buyback/investment contracts (e.g., modest upfront payment coupled with guaranteed/high returns or compulsory buyback and absence of intention or steps to take possession), the applicants were found to be speculative investors. Such applicants are disentitled to initiate CIRP under Section 7; their claims are characterized as recovery claims amenable to other fora. The Court affirms appellate findings that the subject applicants were speculative investors and upholds setting aside of NCLT admission orders. Liberty is preserved to pursue alternative remedies and limitation is held not to bar such claims in appropriate proceedings.

Issue 2 - Applicability of the Ordinance / Amendment Act to Pending Proceedings

Legal framework: The Ordinance / Amendment Act inserted a proviso to Section 7(1) requiring joint filing by a threshold number of allottees (100 or 10%) for initiation of CIRP against a real estate project, and contained a transitional provision dealing with pending filings not admitted before commencement.

Precedent treatment: The Court examines coordinate Bench decisions and interim orders in related proceedings but distinguishes their factual matrix. It accepts Manish Kumar (constitutional validity upheld) but clarifies that applicability depends on the stage of proceedings when the legislative change occurred. The Court invokes established doctrines concerning judicial acts producing prejudice (Actus Curiae Neminem Gravabit) and equitable principles (lex non cogit ad impossibilia).

Interpretation and reasoning: Application of the amendment to pending matters depends on feasibility of compliance and the stage of proceedings at the time of promulgation. Where arguments were heard and orders reserved prior to promulgation, parties could not reasonably be expected to comply with a subsequently introduced procedural requirement before admission. The adjudicating authority has a duty to take judicial notice of intervening legislative changes and, where necessary, afford opportunity to comply before admission. The Court reasons that failure of a Tribunal to account for a legislative change in reserved judgment should not prejudice a litigant; subsequent compliance during appellate proceedings can cure the defect if no substantive prejudice arises to the other side. The doctrine that the act of the Court should not injure suitors is applied to neutralize prejudice caused by reserving orders prior to legislative amendment.

Ratio vs. Obiter: The holding that the Amendment applies generally and its constitutional validity is upheld is ratio; the rule that where orders were reserved before promulgation, retrospective enforcement of the threshold to defeat vested rights is impermissible and that subsequent compliance in appellate proceedings may cure the defect is ratio in the present facts. Broader policy directions and administrative prescriptions are obiterate insofar as they suggest systemic reforms beyond adjudication of the specific appeals, though some measures are framed as directions in exercise of jurisdiction.

Conclusions: The Ordinance / Amendment Act is applicable to Section 7 applications generally. However, where proceedings were at a reserved-order stage prior to promulgation, the threshold requirement cannot be retroactively enforced to prejudice a party; appellate cure of compliance is permissible where no substantive prejudice results. Accordingly, the Court sets aside the portion of the first impugned order that held the Ordinance inapplicable and recognizes that subsequent satisfaction of the threshold in appellate proceedings can validate the petition, applying the doctrine that an act of the Court shall prejudice no one.

Ancillary Doctrinal and Practical Conclusions

The IBC's objectives (revival, maximisation of value, protection of employment and stakeholders) guide restrictive application against speculative misuse. RERA remains the primary forum for homebuyer grievances; IBC is last resort. At admission stage, Tribunals must record a prima facie finding whether an applicant is a genuine homebuyer or a speculative investor to prevent needless CIRP admissions. Speculative investors are not barred from claiming principal amounts in other fora.

Final Disposition as to Issues

Both determinations stand: (i) the subject applicants are speculative investors and hence incompetent to initiate CIRP under Section 7 - admission orders are rightly set aside; (ii) the Ordinance / Amendment Act applies, but where orders were reserved prior to promulgation, the requirement cannot be retrospectively enforced to the prejudice of a party and may be cured by subsequent compliance in appellate proceedings - the NCLAT's contrary conclusion on applicability is set aside to that extent.

Issues: Whether proceedings for assessment and determination of provident fund dues initiated or continued after commencement of CIRP are barred by moratorium, and whether any claim founded on such post-moratorium assessment can be admitted or enforced in the CIRP.

Analysis: The moratorium under Section 14 of the Insolvency and Bankruptcy Code creates a statutory freeze against proceedings that affect the assets and resolution process of the corporate debtor. Assessment proceedings by the provident fund authority, though distinct from recovery, cannot be continued after commencement of CIRP when they culminate in a pecuniary liability against the corporate debtor. A claim founded on inspection or assessment completed during the moratorium cannot be pressed in CIRP. The direction to furnish employee-wise details and reassess the claim was unnecessary once the underlying assessment and demand were held impermissible during moratorium.

Conclusion: The post-CIRP assessment and resulting demand under the provident fund proceedings were not enforceable against the corporate debtor, and the claim based on them could not be admitted in CIRP.

Issues: Whether the Adjudicating Authority erred in rejecting IA No.1100/2022 filed under Section 66 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016, on the ground that the forensic audit report relied upon was inconclusive and unsupported by corroborative evidence.

Analysis: The Court examined whether a standalone forensic audit report, which the report itself characterises as incomplete due to non-cooperation of the management and which lacks supporting documents and verification, can form the sole basis for imposing liability on suspended directors under Section 66 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016. The Court noted that where supporting evidence is absent because of non-cooperation, the resolution lies in criminal investigation to unearth evidentiary material and that an incomplete forensic report cannot substitute for contemporaneous corroborative documents or proof required to establish fraudulent or wrongful trading for the purposes of Section 66.

Conclusion: The rejection of IA No.1100/2022 by the Adjudicating Authority on the ground that the forensic audit report was inconclusive and unsupported by necessary evidence was legally sustainable; the appeal is dismissed and no interference with the Impugned Order is warranted.

1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether a company appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging admission of a Section 7 application, is maintainable at the instance of a shareholder of the corporate debtor.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Maintainability of appeal by shareholder under Section 61 of the Insolvency and Bankruptcy Code, 2016

Legal framework (as discussed)

2.1.1 The challenge before the Tribunal arose from an order admitting an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 and commencing CIRP against the corporate debtor. The appeal was filed under Section 61 of the Code by an appellant whose status is that of a shareholder of the corporate debtor.

2.1.2 The question whether a shareholder/promoter falls within the ambit of an "aggrieved person" under Section 61 and thus has locus to challenge an order of admission under Sections 7 or 9 was earlier referred to a larger Bench of the Tribunal. The larger Bench, by judgment dated 22.07.2025, held that a company appeal at the behest of a shareholder is not maintainable.

Interpretation and reasoning

2.1.3 The Tribunal noted that the appellant's only capacity is that of "shareholder" of the corporate debtor, and that the specific issue of maintainability of an appeal by a shareholder against an order under Section 7 has already been conclusively answered by the larger Bench.

2.1.4 The Tribunal treated the larger Bench pronouncement as binding, observing that it had "already laid the question to rest" by holding that a company appeal at the behest of a shareholder is not maintainable. Consequently, once the status of the appellant as shareholder was established, the appeal failed on maintainability alone.

2.1.5 Although the respondent's counsel had mentioned non-appearance of the appellant on multiple dates, the substantive basis for disposal of the matter was the legal position settled by the larger Bench that a shareholder has no locus to maintain such an appeal under Section 61 against an order admitting a Section 7 application.

Conclusions

2.1.6 The Tribunal concluded that, in light of the larger Bench judgment dated 22.07.2025, a company appeal under Section 61 of the Insolvency and Bankruptcy Code, 2016, challenging the admission of a Section 7 application, is not maintainable at the instance of a shareholder of the corporate debtor.

2.1.7 On that ground alone, the appeal was dismissed as "not maintainable."

1. Issues Presented and Considered

• Whether an appeal filed under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) without a certified copy of the impugned order complies with Rule 22(2) of the National Company Law Appellate Tribunal Rules, 2016 (NCLAT Rules).
• Whether an appeal filed beyond the prescribed 30-day period under Section 61(2) IBC without condonation of delay application is maintainable.
• The effect of failure to file an appeal with a certified copy of the impugned order on limitation and the jurisdiction of the NCLAT.
• The interplay between limitation provisions under the IBC and the requirement of filing a certified copy of the order impugned.
• The scope and limits of the NCLAT's discretionary powers under Rules 14 and 15 of the NCLAT Rules to grant exemption or extend time regarding procedural requirements.
• The date from which limitation period under Section 61(2) IBC commences - whether from pronouncement of the order or its uploading on the website.
• The obligation of an appellant to exercise due diligence in filing appeals under the IBC framework.

2. Issue-wise Detailed Analysis

Issue 1: Compliance with Rule 22(2) NCLAT Rules - Filing Appeal with Certified Copy of Impugned Order

Legal Framework and Precedents: Rule 22(2) NCLAT Rules mandates that every appeal must be accompanied by a certified copy of the impugned order. The Supreme Court in V. Nagarajan v. SKS Ispat & Power Ltd. emphasized that this requirement is not a mere technicality but a substantive condition for filing an appeal under IBC. The Court clarified that parties cannot automatically dispense with this obligation, and delay in obtaining the certified copy, once an application is filed, is excluded for limitation purposes.

Court's Interpretation and Reasoning: The Court held that filing an appeal without a certified copy, without seeking exemption under Rule 14, is defective. While the NCLAT has discretionary power to exempt compliance in the interest of substantial justice, this power does not confer an automatic right to dispense with the requirement. The act of applying for a certified copy evidences diligence in pursuing litigation timely.

Application of Law to Facts: The respondent filed the appeal without a certified copy and without any application for exemption or condonation of delay. The certified copy was sought only after the appeal was filed and condonation of delay was applied for much later. This failure rendered the appeal defective and barred by limitation.

Conclusion: The appeal filed without a certified copy and without timely application for exemption or condonation is non-compliant with Rule 22(2) and liable to be dismissed on that ground.

Issue 2: Limitation Period under Section 61(2) IBC and Condonation of Delay

Legal Framework and Precedents: Section 61(2) IBC prescribes a 30-day limitation period for filing appeals against NCLT orders, with a maximum extension of 15 days upon showing sufficient cause. The Supreme Court in V. Nagarajan and A Rajendra v. Gonugunta Madhusudhan Rao clarified that limitation starts from the date of pronouncement of the order, not from the date of uploading on the website. The power to condone delay is strictly circumscribed and conditional on sufficient cause.

Court's Interpretation and Reasoning: The Court emphasized that the limitation period begins from the pronouncement of the order in open court, not from the date of uploading. The appellant must file the appeal promptly and, if delayed, must apply for condonation within the maximum 15-day extended period. The Court rejected the contention that uploading the order triggers limitation, underscoring the legislature's intent to ensure timely resolution under IBC.

Application of Law to Facts: The appeal was e-filed 32 days after pronouncement (23.06.2023 to 25.07.2023), beyond the 30-day period, without any condonation application at the time of filing. The condonation application was filed much later (22.09.2023), beyond the permissible 15-day extended period. Hence, the appeal was barred by limitation.

Treatment of Competing Arguments: Reference to a NCLAT judgment allowing exemption or delayed filing was rejected as inconsistent with Supreme Court precedent. The NCLAT's failure to consider limitation was held to be an error.

Conclusion: The appeal was barred by limitation as it was filed beyond the prescribed period without timely condonation application.

Issue 3: Effect of Filing Defective Appeal on NCLAT's Jurisdiction

Legal Framework and Precedents: The IBC is a complete code with strict timelines to prevent delays in insolvency resolution. The Supreme Court has held that non-compliance with procedural requirements such as filing a certified copy and adhering to limitation periods affects the maintainability of appeals and the jurisdiction of the NCLAT.

Court's Interpretation and Reasoning: The Court noted that the NCLAT erred in not considering the limitation objection raised by the appellant and in entertaining the appeal despite defective filing. The failure to comply with mandatory procedural requirements and limitation renders the appeal invalid and deprives the NCLAT of jurisdiction.

Application of Law to Facts: The NCLAT's common judgment did not address limitation or the absence of a certified copy at the time of filing. This oversight was fatal to the appellate jurisdiction in the present case.

Conclusion: The appeal was not properly instituted; therefore, the NCLAT lacked jurisdiction to decide the appeal on merits.

Issue 4: Date of Commencement of Limitation Period under IBC

Legal Framework and Precedents: The Supreme Court in A Rajendra and V. Nagarajan held that the limitation period under Section 61(2) IBC commences from the date of pronouncement of the order in open court. Uploading of the order on the website is not the triggering event for limitation.

Court's Interpretation and Reasoning: The Court emphasized that the legislature deliberately omitted any reference to availability of the order for limitation computation, signaling the need for prompt action by aggrieved parties.

Application of Law to Facts: The order was pronounced on 23.06.2023, and limitation commenced on that date. The respondent's reliance on the uploading date (26.06.2023) to compute limitation was rejected.

Conclusion: Limitation runs from pronouncement date, not from date of uploading.

Issue 5: Scope of NCLAT's Discretion under Rules 14 and 15 NCLAT Rules

Legal Framework and Precedents: Rules 14 and 15 of the NCLAT Rules empower the Tribunal to exempt parties from compliance with procedural rules and to extend time, respectively, in the interest of substantial justice.

Court's Interpretation and Reasoning: The Court held that these powers are discretionary and cannot be exercised to nullify mandatory provisions such as Rule 22(2) requiring a certified copy with the appeal. Exemption or extension cannot be used to dispense with filing a certified copy altogether or to condone delay beyond statutory limits.

Application of Law to Facts: The respondent did not seek exemption or extension at the time of filing the appeal, and the NCLAT did not exercise these powers properly. The invocation of these powers cannot cure the fundamental defects in filing.

Conclusion: NCLAT's discretionary powers cannot override mandatory procedural requirements or statutory limitation.

Issue 6: Obligation of Diligence by Appellants under IBC

Legal Framework and Precedents: IBC aims to ensure time-bound resolution of insolvency to protect the economy and stakeholders. The Supreme Court has repeatedly underscored the need for diligence and promptness by parties in pursuing remedies.

Court's Interpretation and Reasoning: The Court stressed that filing an appeal under IBC requires proactive steps, including immediately applying for a certified copy upon pronouncement of the order. Delay or casual filing without compliance undermines the legislative intent.

Application of Law to Facts: The respondent's delayed application for a certified copy and condonation of delay reflected lack of diligence, which is impermissible under the IBC regime.

Conclusion: Aggrieved parties must exercise due diligence and comply with procedural requirements promptly to maintain appeals under IBC.

Issues: (i) Whether the entries in the balance sheet of financial year 2019-20 constituted a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963. (ii) Whether the limitation period for the Section 7 application under the Insolvency and Bankruptcy Code, 2016 was saved by the COVID-related exclusion order and was therefore within time.

Issue (i): Whether the entries in the balance sheet of financial year 2019-20 constituted a valid acknowledgment of debt under Section 18 of the Limitation Act, 1963.

Analysis: Section 18 applies to proceedings under the Insolvency and Bankruptcy Code, 2016 by virtue of Section 238A, and limitation for a Section 7 application is governed by Article 137 of the Limitation Act, 1963. Acknowledgment must relate to a subsisting liability and indicate the jural relationship of debtor and creditor, though the exact nature of the debt need not be specified. The Court held that a balance sheet must be examined case by case, in its surrounding context, and may constitute acknowledgment where its tenor shows an admission of continuing liability. Reading the financial statements of 2015-16, 2016-17, 2017-18 and 2019-20 together, the Court found that the 2019-20 balance sheet reflected the same borrowing, showed no repayment in the cash flow statement, and therefore evidenced that the debt remained unpaid.

Conclusion: Yes. The balance sheet of financial year 2019-20 constituted a valid acknowledgment of debt and admitted the subsisting jural relationship.

Issue (ii): Whether the limitation period for the Section 7 application under the Insolvency and Bankruptcy Code, 2016 was saved by the COVID-related exclusion order and was therefore within time.

Analysis: The acknowledgment in the balance sheet was signed on 12.08.2020, when limitation was still running. On that basis, the fresh period of limitation would ordinarily have extended till 11.08.2023. The Court held that paragraph 5(I) of the order dated 10.01.2022 excluded the period from 15.03.2020 to 28.02.2022 for all judicial and quasi-judicial proceedings, and that this exclusion governed the case. Paragraph 5(III) did not apply because limitation did not expire during the excluded period.

Conclusion: Yes. The application was within limitation, and paragraph 5(I), not paragraph 5(III), applied.

Final Conclusion: The orders of the NCLT and NCLAT were set aside, the Section 7 application was treated as filed within limitation, and the matter was sent back for consideration on merits.

Ratio Decidendi: An entry in a balance sheet can amount to acknowledgment under Section 18 of the Limitation Act, 1963 if, read in its surrounding context, it evidences a subsisting liability and the jural relationship of debtor and creditor; where such acknowledgment falls within the COVID exclusion period, the limitation computation must give effect to paragraph 5(I) of the Supreme Court's extension order.