The following is a snapshot of the important orders passed by the National Company Law Appellate Tribunal (“NCLAT”), under the Insolvency and Bankruptcy Code, 2016 ("Code”), during the period between January 16, 2025 to January 31, 2025.

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

A. Pre-admission Stage

1. In Acute Daily Media Private Limited v. Rockman Advertising and Marketing (India) Limited (Company Appeal (AT) (Insolvency) No. 1480 of 2024), the NCLAT had an occasion to examine the contours of Section 65 of the Code and went onto observe that the degree of proof and evidence required to attract its application is beyond reasonable doubt. It also noted that debt is always seen in isolation and even violations of the provisions of the Companies Act, 2013 (in the instant case, violation of section 186) could indicate the existence of mala fide intention. Finally, it observed that the Adjudicating Authority retains the jurisdiction to entertain a Section 65 application even after the admission of CIRP.

2. The NCLAT, in Jagdish Prasad Sharma v. Silverline Graphics Private Limited (Company Appeal (AT) (Insolvency) No. 2067 of 2024), highlighted the complex nature of transactions between the corporate debtor, operational creditor and their promoters, to observe that the concept of separate legal entity could not be considered in such scenarios to see the transactions in isolation, and the veil of the corporate debtor had to be pierced. It also went on to observe that a pre-existing dispute could not be put to a straitjacket and even inter-se promoter disputes, when intermingled with the entities, could meet the test of a pre-existing dispute.

3. In Mr. Arvind Gulsia v. Om Sai Boxes (Company Appeal (AT) (Insolvency) No. 41 of 2024), the NCLAT upheld the right of an unregistered partnership firm to maintain a petition under Section 9 of the Code by observing that the bar under Section 69(2) of Partnership Act, 1932 only applies to ‘suits’ and not to an ‘application’ required for the initiation of CIRP.

4. In Vikram Bajaj v. ASJ Finsolutions Private Limited (Company Appeal (AT) (Ins) No. 1612 of 2024), by observing that the timeline contained in Clause 12 of Schedule-I of the Liquidation Regulations, 2016 is statutory in nature, the NCLAT held that forfeiture of earnest money deposit cannot be questioned based on the ground that no loss was caused to the stakeholder, nor on the basis that the property acquired under the auction was subject to litigation by third party.

5. In WPIL Limited v. Gammon India Limited (Company Appeal (AT) (Ins.) No. 12 of 2024), the NCLAT held that the provisions contained in Section 15(2) of the Limitation Act, 1963 (exclusion of time in certain other cases) cannot be applied to seek exclusion of the mandatory 10-day notice period under Section 8 of the Code from the period of limitation of 3 (three) years under Section 137 of the Limitation Act, 1963, as the aforesaid Section 15(2) applies only in the context of a ‘suit’ and not to an ‘application’ such as the one filed under Section 9.

B. CIRP Stage

1. The NCLAT, in HDFC Bank Limited v. Pratim Bayal (Company Appeal (AT) (Insolvency) No. 1472 of 2023), dismissed an appeal filed by a dissenting financial creditor challenging the order of the Adjudicating Authority approving distribution under the resolution plan on the basis of security interests of the respective financial creditors, as opposed to their voting share in the Committee of Creditors (“CoC”). The NCLAT took due note of the amendments made in Section 30(4), giving CoC the jurisdiction to decide distribution based on either voting share or security interest, emphasizing that the term 'may' grants the CoC discretion in considering secured creditors' security interests when approving resolution plans.

2. In State Bank of India, Singapore Branch v. Shantanu Prakash (Company Appeal (AT) (Ins) No. 1351 of 2023), the NCLAT had the opportunity to examine the role and responsibility of the Resolution Professional as well as the Adjudicating Authority in relation to insolvency of a foreign subsidiary of the corporate debtor.

By observing that the assets held by the wholly owned subsidiary of the corporate debtor do not form part of the corporate debtor’s assets, it was observed that the Resolution Professional had no duty to preserve such assets of the subsidiary. In relation to whether the Adjudicating Authority had jurisdiction to order valuation of the assets of the foreign subsidiary, the NCLAT answered the issue in negative and went onto observe that the corporate debtor in the capacity of the corporate guarantor to a foreign subsidiary undergoing insolvency had no locus to approach the Adjudicating Authority alleging undervaluation of the assets.  

3. In Anil Kumar v. Mukund Choudhary (Company Appeal (AT) (Insolvency) No. 38 of 2025), the NCLAT addressed two key questions - whether the 180-day moratorium period under section 101(1) of the Code is directory or mandatory in nature, and whether the Adjudicating Authority has the power to extend this period. The NCLAT concluded that the moratorium period is mandatory, basing this interpretation on the statutory provisions for nullification in cases of non-compliance. Regarding the second question, the NCLAT held that the moratorium period begins when the application is admitted and continues until the Adjudicating Authority issues its order. The NCLAT determined that allowing the Adjudicating Authority to extend this period would contradict the statutory framework established under Section 101(1).

It is pertinent to note that a writ petition challenging the validity of Section 101 of the Code has been dismissed by the Supreme Court in its order dated February 14, 2025, in the case of Mukund Choudhary v. Union of India [Writ Petition (Civil) No. 114/2025].

4. The NCLAT, in Shikha Lal v. Earthcon Universal Infratech Private Limited (Company Appeal (AT) (Ins) No. 1027 of 2024), held that when a homebuyer's termination of flat allotment was conditional upon receiving the refund of money and cancellation of documents, the claim filed by such allottees to be admitted as  ‘homebuyers.'

C. Liquidation Stage

1. The NCLAT, in State Bank of India v. IDBI Bank Limited (Company Appeal (AT) (Insolvency) No. 335 of 2024), upheld the decision of the Adjudicating Authority to direct the distribution of the sale proceeds in liquidation as per the admitted claims of the financial creditors on a pro-rata basis, and not on the basis of security interest of individual creditors. In the course of arriving at the conclusion, the NCLAT took due note of the report issued by the Insolvency Law Committee on March 26, 2019, wherein the Committee had opined that the priority of charge on the secured asset has to be considered while returning the share of concerned creditors. It also took note of the decision of the Supreme Court in the matter of ICICI Bank v. SIDCO Leathers [(2006) 10 SCC 452], wherein the Court had advocated for maintaining the inter-se priority amongst the secured creditors at the time of distribution. However, by relying on the decision of the Supreme Court in India Resurgence ARC v. Amit Metaliks [(2021) 19 SCC 672], the NCLAT went on to observe that the statutory scheme delineated under Section 53(1) of the Code only admits distribution amongst the secured creditors on the basis of their admitted claim and not on the basis of security interests.

2. In Avil Menezes v. Hinduja Leyland Finance Limited (Company Appeal (AT) (Ins) No. 555 of 2024), the NCLAT dealt with the principle regarding the priority of charges in liquidation proceedings. The NCLAT held that in cases of refinancing existing assets, the mere registration of charge under Section 77 of the Companies Act, 2013, with the Registrar of Companies cannot override the first charge holder's rights, particularly when such assets were already subject to an existing charge. The NCLAT emphasized that for creating a subsequent charge over assets already charged to existing lenders, obtaining a no objection certificate from the first charge holder is essential. Following the principle of ‘qui prior est tempore potior est jure’ (first in time is stronger in law) under Section 48 of the Transfer of Property Act, 1882, the NCLAT affirmed that when rights are granted at different times, the one who possesses the earlier right will have the legal advantage.

The NCLAT also clarified that Section 52 of the Code (rights of the secured creditors in liquidation) can only be invoked when the asset is charged exclusively to a particular creditor.

D. Miscellaneous

1. In Kotak Mahindra Bank Limited v. Mohit Kumar (Company Appeal (AT) (Insolvency) No. 2242 of 2024), the NCLAT held that when the limitation period's last day falls on a public holiday, such day stands excluded under section 61(2) of the Code in terms of the Limitation Act, 1963 and rule 3 of the NCLAT Rules, 2016. The NCLAT further clarified that this exclusion cannot be extended to automatically exclude all Saturdays and Sundays from the limitation period.

2. The NCLAT, in Anita Goyal v. Vistra ITCL (India) Limited (Company Appeal (AT) (Insolvency) No.2282 of 2024), reiterated its earlier position that an application for personal insolvency against a personal guarantor under Section 95(1) of the Code can be filed before the Adjudicating Authority that has the jurisdiction to entertain such claims, even in the absence of any pending or liquidation proceedings against the corporate debtor.

While doing that, the NCLAT took note of the decisions rendered bench of the Kolkata Bench of the Adjudicating Authority in Aditya Birla Finance Limited v. Sarita Mishra (Company Petition (IB) No. 67 of 2023) and Tata Capital Financial Services Limited v. Arjun Agarwal (C.P.(IB) 51/KB/2024), where the Adjudicating Authority had held that the NCLT would have no jurisdiction to entertain CIRP applications against personal guarantors in cases where no proceedings against the corporate debtor had ever been initiated and went onto hold these decisions to be ‘illusionary and without any basis’ and do not lay down correct law as they contradicted the binding precedents which had already determined that Section 95 applications are maintainable regardless of pending proceedings against corporate debtor.

In our understanding, the issues before the NCLAT were distinct from the ones which were addressed by the Kolkata Bench. For instance, while the NCLAT focused on whether non-pendency of ongoing proceedings affects jurisdiction, the issue before the Kolkata Bench was whether such jurisdiction could be assumed where no proceedings had been initiated against the corporate debtor. As apparent, the issues were distinct and, by failing to appreciate the nuanced difference and distinction that the Kolkata Bench decisions highlighted, the dismissal of the decisions by NCLAT could create confusion in future insolvency cases.

3. In Marvel Landmarks Private Limited v. Jay Nihalani (Company Appeal (AT) (Insolvency) No. 2227 of 2024), the NCLAT observed that when an order was obtained by misrepresentation and taking advantage of the absence of the other party, the Adjudicating Authority has the power to recall such an order as per its inherent powers under Rule 11 of the NCLT Rules, 2016.

4. In Shantanu Jagdish Prakash v. State Bank of India (Company Appeal (AT) (Ins) No. 1609 of 2024), the NCLAT noted that a lender can initiate personal insolvency proceedings under Section 95 of the Code as the beneficiaries of a trust arrangement, without being party to the guarantee document. The NCLAT also rejected the challenge to the initiation of insolvency against the personal guarantor on the basis that pending Debts Recovery Tribunal cases with counterclaims by the guarantor do not affect crystallization of debt that is otherwise payable.

This update has been contributed by Arka Majumdar (Partner), Vikram Chaudhuri (Senior Associate) and Aakriti Garodia (Associate).

The update was first published on Bar & Bench.

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