National Company Law Appellate Tribunal judgments

NCLAT rules that assets under unlawful possession of a corporate debtor, even after a Supreme Court-affirmed eviction decree, cannot form part of the Corporate Insolvency Resolution Process (CIRP). The ruling reinforces that legal ownership, not physical possession, determines asset inclusion under the IBC, impacting insolvency proceedings where disputed assets are involved.

NCLAT rules that a personal guarantor's insolvency can be initiated under the IBC based on contractual notice and cumulative evidence, even if postal receipts are absent. The ruling clarifies that strict proof of service is not mandatory if the guarantee deed authorizes alternative invocation methods, impacting lenders and guarantors in insolvency proceedings.

NCLAT clarifies that a financial creditor submitting a resolution plan under the IBC is not barred from voting on its own plan, rejecting the NCLT's conflict of interest rationale. The ruling reinforces the commercial wisdom of the Committee of Creditors (CoC) and expands the scope of eligible resolution applicants, impacting insolvency proceedings where creditors seek to revive distressed companies.

NCLAT rules that possessory rights under Section 53A of the Transfer of Property Act, when affirmed by a consent decree, cannot be disturbed by a Resolution Professional under the Insolvency and Bankruptcy Code. The ruling clarifies that IBC proceedings do not automatically extinguish pre-existing property rights established through judicial decrees, offering critical protection to parties with settled possessory claims.

NCLAT grants exclusion of 87 days from the CIRP timeline due to delays in transitioning Resolution Professionals, emphasizing that liquidation should be a last resort. The ruling reinforces the need to preserve corporate debtors as going concerns, offering relief to stakeholders facing procedural delays under the IBC.

The NCLAT has ruled that once a resolution plan is approved under Section 31 of the IBC, even secured operational creditors like GNIDA cannot resurrect or override settled payout terms through post-approval claims. This reinforces the finality of approved plans and prevents fragmentation of creditor recoveries, ensuring predictability for resolution applicants and financial stakeholders.

The NCLAT has ruled that e-filing under the Insolvency and Bankruptcy Code completes on the day of submission, regardless of time, as long as it occurs before midnight. This overturns the application of Delhi High Court’s 1600 hrs cutoff to NCLAT proceedings, affirming that statutory limitation periods end at 23:59:59 - a critical win for insolvency practitioners and litigants navigating digital filing deadlines.

The NCLAT has ruled that a welfare association can initiate corporate insolvency proceedings under Section 7 of the IBC by submitting affidavits from 98 out of 152 homebuyers, even if nine affidavits contain minor discrepancies. This clarifies that procedural imperfections do not nullify financial creditor status when the core authorization and identity verification are intact, empowering homebuyer collectives to act collectively under the IBC.

The NCLAT has ruled that unregistered profit-sharing agreements, even if historically honored, cannot override the statutory moratorium under IBC to claim possession of corporate debtor assets. This clarifies that only registered leases or lawful tenancies survive CIRP, empowering Resolution Professionals to evict unauthorized occupants without prolonged litigation.

The NCLAT has ruled that ongoing settlement discussions and partial debt repayments cannot override clear evidence of financial default under Section 7 of the IBC. This clarifies that corporate insolvency proceedings remain valid if the debt is undisputed and due, reinforcing creditor rights against tactical delays and undermining the integrity of the insolvency process.

The NCLAT has ruled that a financial creditor may initiate Corporate Insolvency Resolution Process under Section 7 of the IBC solely on the basis of a loan recall triggered by a Material Adverse Change clause, even if the debtor challenges the recall through arbitration. This clarifies that MAC-based defaults are actionable under IBC without waiting for arbitration outcomes, strengthening creditors' ability to act swiftly on contractual breaches that undermine financial viability.

NCLAT has ruled that a technical failure in the e-auction platform excluding a bonafide bidder undermines the core IBC principle of value maximization, rendering the sale void. The liquidator’s duty to ensure fair, transparent, and non-discriminatory bidding cannot be outsourced to flawed systems - this sets a precedent for all future liquidation auctions under the Code.

NCLAT rules that inter-group fund transfers lacking genuine credit disbursal or repayment obligation fail the 'financial debt' test under Section 5(8) of the Insolvency and Bankruptcy Code. The ruling shields corporate debtors from IBC proceedings where transactions are sham or circular, reinforcing the need for commercial substance in financial creditor claims.

The NCLAT has ruled that RERA orders passed after the commencement of CIRP cannot be used to impose new financial liabilities on a corporate debtor. Only debts existing before the moratorium qualify as operational claims, ensuring that post-CIRP adjudications do not disrupt the insolvency process or unfairly prioritize homebuyers over other creditors.

NCLAT clarifies that third parties, like Orix Leasing, can be held liable under Section 66 IBC for fraudulent trading if complicit in the corporate debtor's scheme. The ruling mandates a fresh hearing to assess evidence of collusion, setting a precedent for extending liability beyond directors in insolvency proceedings.

NCLAT clarifies that the limitation period for IBC appeals begins from the date of order upload on the tribunal's portal, not the date of pronouncement. The ruling condones delay where an operational creditor, unaware of the proceedings, files an appeal within 15 days of learning of the order, reinforcing procedural fairness in insolvency disputes.

NCLAT ruled that co-developers of the completed 'Doon Square' project can execute registration deeds for homebuyers under the Master Agreement dated 08.10.2024, despite the corporate debtor's insolvency. The Tribunal directed statutory authorities to accept joint applications, reinforcing homebuyers' rights in project-wise resolution under the Insolvency and Bankruptcy Code.

NCLAT reinforces the finality of liquidation auctions under 'as is where is' terms, holding that bidders cannot challenge confirmed sales through post-bid enhancements unless fraud or procedural violations are proven. The ruling protects auction integrity and prevents last-minute bid manipulations, ensuring certainty for liquidators and successful resolution applicants under the Insolvency and Bankruptcy Code.

NCLAT rules that an Interim Resolution Professional (IRP) is entitled only to proportional fees for duties performed during a stay on Committee of Creditors (CoC) constitution, rejecting claims for full statutory remuneration. The ruling clarifies that fee entitlement under IBC is contingent on actual functions discharged, not mere appointment duration.

NCLAT rules that interest-free loans from directors may qualify as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code if they reflect a commercial borrowing effect, even without formal agreements. This expands the scope of financial creditors and impacts corporate governance and insolvency proceedings.

The NCLAT has clarified that operational creditors, even with admitted claims under the IBC, cannot invoke RERA’s statutory trust provisions to extract funds from the project’s 70% escrow account during corporate insolvency. This upholds the hierarchy of the IBC framework, ensuring resolution plans - not piecemeal claims - govern asset distribution, protecting homebuyers and the integrity of the insolvency process.

NCLAT rules that a mortgage executed seven years after loan disbursement but within the one-year look-back period under Section 43 IBC constitutes a preferential transaction, regardless of prior contractual intent. The ruling clarifies that timing of security perfection-not just loan origination-determines vulnerability to avoidance, impacting lenders and resolution professionals in CIRP.

NCLAT rules that a contractual obligation to pay minimum guaranteed royalty qualifies as operational debt under IBC Section 9, even in the absence of invoices, if the default is admitted and exceeds ₹1 lakh. This expands the scope of operational debt to include uninvoiced but contractually mandated payments, impacting creditors' rights in insolvency proceedings.

The NCLAT has ruled that when the Committee of Creditors approves a full settlement, any pending appeal under Section 7 IBC becomes infructuous and must be disposed of, as the statutory pathway for withdrawal under Section 12A now governs the outcome. This reinforces that procedural efficiency trumps appellate redundancy when resolution is secured, benefiting corporate debtors in essential services like healthcare.