Catalyst Trusteeship Ltd. vs Ecstasy Realty Pvt. Ltd - A corporate debtor is entitled to establish that the financial debt is not due and no default had occurred in that regard to defeat a financial creditor’s application for corporate insolvency resolution process under Section 7 of the Code. However, such an exercise cannot assume an indirect way of raising a pre-existing dispute, which would be available only to ward off an operational creditor’s claim under Section 9 of the Code.

 SCI (2026.02.24) in Catalyst Trusteeship Ltd. vs Ecstasy Realty Pvt. Ltd. [(2026) ibclaw.in 104 SC, Civil Appeal No. 7424 of 2025] held that;

• On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date.

• Thus, the concept of a pre-existing dispute, which may be a stumbling block for admission of an application filed under Section 9 of the Code by an operational creditor, has no bearing on an application filed by a financial creditor under Section 7 of the Code.

• A corporate debtor is entitled to establish that the financial debt is not due and no default had occurred in that regard to defeat a financial creditor’s application for corporate insolvency resolution process under Section 7 of the Code. However, such an exercise cannot assume an indirect way of raising a pre-existing dispute, which would be available only to ward off an operational creditor’s claim under Section 9 of the Code.

• Ordinarily, this Court would not choose to reappreciate a matter on facts when the jurisdictional National Company Law Tribunal and, in appeal, the National Company Law Appellate Tribunal have recorded concurrent findings. The exception to this self-imposed rule would be when the perversity of such concurrent findings is clearly established. We find the present case to be one such case, where the perversity of the findings recorded by the NCLT and by the NCLAT is glaring and manifest, beseeching interference by this Court at the second appellate stage.

Excerpts of the Order; 

# 1. Refusal to initiate corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 20161, against Ecstasy Realty Pvt. Ltd., the respondent, is in issue. CP (IB) 922/MB/C-I/2022 filed in that regard by Catalyst Trusteeship Ltd. (hereinafter, referred to as ‘the debenture trustee’) was dismissed by the National Company Law Tribunal, Mumbai Bench-I (‘NCLT’), vide order dated 03.02.2023. The same stood confirmed in appeal by the National Company Law Appellate Tribunal, Principal Bench, New Delhi (‘NCLAT’), vide judgment dated 16.04.2025 passed in the debenture trustee’s Company Appeal (AT) (Insolvency) No. 467 of 2023. Aggrieved thereby, the debenture trustee is in appeal before this Court under Section 62 of the Code.

# 2. The respondent company proposed to erect a residential-cum-retail project in Mumbai and to meet its requirement of funds in that regard, it proposed to issue 850 redeemable non-convertible debentures of the value of Rs. 850 crore in two series, viz., Series A and Series B. The resolution in this regard was passed by the Board of Directors of the respondent company on 20.03.2018. On the same day, the debenture trustee was appointed on behalf of the debenture holders. A Debenture Trust Deed (DTD) was executed between the debenture trustee, the respondent company and Shobhit J. Rajan, the mortgage provider, on 27.03.2018. Series A debentures to the tune of Rs. 600 crore were fully subscribed by the debenture holders and the entire amount was disbursed to the respondent company on 28/29.03.2018. ECL Finance Limited (ECLF), Edelweiss Finvest Pvt. Ltd., Barbelo Estates LLP, an entity of the Edelweiss group, and other directors/associates held these debentures. Series B debentures, amounting to Rs. 250 crore, never came to be issued.

# 3. While so, on 16.03.2022, the respondent company addressed an e-mail to ECLF proposing the restructuring of the loan repayment under the debentures, requesting for principal and interest moratorium of 18 months in respect of the balance debentures apart from other relaxations, including release of the Bandra property, mortgaged by its sister concern, Variegate Real Estate Pvt. Ltd., and release of Rs. 25 crore, so as to continue with the documentation process for the Sapphire (Blackrock) transaction. On 23.03.2022, ECLF informed the respondent company that, subject to completion of the Sapphire transaction by 25.03.2022, it was agreeable to providing restructuring along with principal and interest moratorium of 18 months for the balance debentures and for release of the Bandra property from the security package. On 29.03.2022, by way of an e-mail, the respondent company assured ECLF about completion of the Sapphire transaction and sought confirmation of the restructuring proposal. It also stated that it was awaiting a NOC from the debenture trustee and that the same was required urgently. On 30.03.2022, ECLF replied by e-mail, informing the respondent company that it was agreeable to provide extension but would need to run the entire process internally based on the overall resolution plan and the final restructuring approval would be provided around the month of June, 2022. Reference was also made to issuance of a NOC by the debenture trustee and the respondent company was informed that if it had any issues with the date of the said certificate, it could reach out to the debenture trustee, which would do the needful.

# 4. In this regard, we may note that the respondent company addressed letter dated 23.03.2022 to the debenture trustee seeking its NOC to avail funding from India Credit Investment Fund to the tune of Rs. 152 crore, through non-convertible debentures, against a charge on 18 unsold flats in Phase I of the project along with the receivables of sold flats, aggregating to Rs. 4.42 crore, and requested for issuance of a NOC and for release of the charge on the 18 unsold flats and receivables of Rs. 4.42 crore at the earliest. Notably, there was no mention of the restructuring proposal under discussion between the respondent company and ECLF in this letter. In turn, the debenture trustee addressed letter dated 28.03.2022 to the respondent company, wherein it stated that it had no objection to the issuance of non-convertible debentures of Rs. 152 crore by the respondent company and creation of a charge over the 18 unsold flats and the receivables of Rs. 4.42 crore. It was further stated that upon receipt of Rs. 152 crore from the respondent company in the escrow account, the debenture trustee would immediately release the charge over the said property. Significantly, there was no mention in this letter also of the restructuring proposal or of the debenture trustee even being aware of it. On the other hand, on 28.04.2022, the debenture trustee addressed a demand letter to the respondent company, stating that Rs. 65,49,72,125/- was overdue on the debentures as on 15.04.2022 and asking for payment.

# 5. It appears that it was only thereafter that the debenture trustee was brought into the picture apropos the restructuring proposal. Pertinently, none of the earlier e-mails exchanged between ECLF and the respondent company were marked to or shared with the debenture trustee. By its letter dated 29.04.2022 addressed to the respondent company, the debenture trustee stated that, with reference to the respondent company’s e-mail dated 29.03.2022 sent to one of the majority debenture holders in relation to restructuring of the debentures and their response e-mail dated 30.03.2022, the said e-mails had been forwarded to it for its record and necessary action and, acting as the trustee for the benefit of the debenture holders, the debenture trustee requested the respondent company to provide the information/data and documents enumerated therein so that the same could be placed before the debenture holders for their internal processing and approval. The debenture trustee further stated that, till the restructuring was formally approved by the debenture holders, any payment shortfall would be an event of default. The debenture trustee followed up with letter dated 17.05.2022, referring to its earlier letter dated 28.04.2022 and calling upon the respondent company to pay the overdue amount of Rs. 65,49,72,125/- at the earliest.

# 6. By its reply dated 19.05.2022, the respondent company stated that it had provided all data to ‘Edelweiss’ and advised the debenture trustee to collect the data from it. Having stated so, it offered to send the documents, without prejudice. It referred to its correspondence with ‘Edelweiss’ and claimed that no payment was due from it till September, 2023. The debenture trustee thereupon informed the debenture holders on 06/08.06.2022 about the respondent company’s restructuring proposal and sought their approval. Thereafter, on 10.06.2022, the debenture trustee informed the respondent company that the restructuring proposal had been rejected by 94.84% of the debenture holders.

# 7. On 21.07.2022, the debenture trustee issued a loan recall notice, requiring the respondent company to pay the entire dues with interest thereon, amounting to Rs. 1203,55,50,671.11. The respondent company, in turn, issued a reply though its lawyers on 29.06.2022, stating that it was filing a commercial suit along with an interim application. The debenture trustee filed an application under Section 7 of the Code on 25.08.2022 seeking initiation of insolvency process against the respondent company. The said application came to be dismissed by the NCLT on 03.02.2023. The same stood confirmed by the NCLAT on 16.04.2025, leading to the filing of the present appeal.

# 8. Perusal of the order passed by the NCLT reflects that the NCLT proceeded on the premise that a moratorium was already in place pursuant to the negotiations between the respondent company and one of the debenture holders. Observing that insolvency proceedings were not in the nature of recovery proceedings, the NCLT dismissed the company petition. In appeal before the NCLAT, it was specifically contended on behalf of the debenture trustee that, in terms of clause 4.4 of the DTD, the respondent company was required to maintain an interest payment reserve account in escrow with the bank and was liable to pay interest to the debenture holders, compounded quarterly. As the respondent company had failed to do so, the debenture trustee issued recall notice dated 21.07.2022 to the respondent company, demanding repayment of the principal amount along with interest, amounting to Rs. 1,203.55 crore. It was pointed out that the understanding of the NCLT that a moratorium was in place was erroneous as the argument in that regard was based on the discussions held by the respondent company with only one of the debenture holders and there was no modification of the DTD in accordance with the procedure prescribed therein. It was pointed out that the said debenture holder, ECLF, could not have acted on behalf of the other debenture holders.

# 9. However, the NCLAT placed reliance on the letter dated 28.03.2022 addressed by the debenture trustee to the respondent company and held against it, by inferring therefrom that it was aware of the restructuring proposal. However, we do not find it to be so, as already indicated hereinabove. The debenture trustee had only stated therein that it had no objection to the respondent company availing further funding by issuing non-convertible debentures and assured that, upon receipt of Rs. 152 crore from the respondent company in the escrow account, it would immediately release the charge over 18 unsold flats and the receivables of Rs. 4.42 crore. This letter was with regard to the release of that property to enable the respondent company to avail further funding and had nothing to do with its restructuring proposal. Absence of any mention in this letter of the restructuring proposal put forth by the respondent company to ECLF speaks for itself. The letter was in aid of the respondent company keeping itself safe from being branded a non-performing asset, as it was already in default, and nothing more.

# 10. As regards the release of a sum of Rs. 9.33 crore to the respondent company by the debenture trustee, which was another factor that had weighed with the NCLT, the specific contention of the debenture trustee was that this amount had been released towards project expenses upon instructions from the debenture holders, following the request received from the respondent company. The debenture trustee, therefore, asserted that this was not a fresh disbursal and could not be looked upon as integral to the so-called restructuring proposal. We may note that it was the specific case of the debenture trustee that Rs. 5 crore was disbursed from the Sapphire transaction escrow account while Rs. 4.33 crore was released from the DTD escrow, perhaps towards the receivables for the sold flats. Both these transactions were clearly independent and had no nexus with the restructuring proposal, which contemplated the release of Rs. 25 crore and not a lesser sum.

# 11. In effect, the findings of the NCLAT were that the debenture trustee was aware of the restructuring of the loan by the respondent company and ECLF; the debenture trustee and the debenture holders, by their conduct, agreed to implement such restructuring, whereby an 18 months moratorium became operative and subsisted till September, 2023, thereby negating the default claim of the debenture trustee; and lastly, the debenture trustee and the debenture holders deliberately engineered a default so as to coerce the respondent company.

# 12. In this regard, we may note the settled legal position that for admission of an application under Section 7 of the Code, the adjudicating authority is only required to examine and satisfy itself that a financial debt exists and there is default in relation thereto. In this context, the observations of this Court in Innoventive Industries Limited vs. ICICI Bank and another2 [(2017) ibclaw.in 02 SC] are of relevance and are extracted hereunder:

• ‘30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.’

Thus, the concept of a pre-existing dispute, which may be a stumbling block for admission of an application filed under Section 9 of the Code by an operational creditor, has no bearing on an application filed by a financial creditor under Section 7 of the Code.

# 13. Significantly, the record reflects that correspondence by the respondent company with regard to restructuring of the loan facility under the debentures was with one Saahil Dugar, who was associated with Edelweiss Alternative Asset Advisors Limited, an Edelweiss group company. The case of the respondent company, as is evident from its counter affidavit filed before us, was that he was acting on behalf of the Edelweiss group/ECLF. No authorization in that regard was produced. Thus, the restructuring proposal was addressed by the respondent company to only one debenture holder, viz., ECLF. In the absence of express authorization of Saahil Dugar to act on behalf of the other debenture holders, which include a company, an LLP and individuals, his actions could not bind them. Though the respondent company claims that ECLF acted for the Edelweiss group, the fact remains that the other group company and the LLP, legal entities in their own right, held debentures separately. Therefore, the mere assertion that ECLF acted on behalf of the others has no merit in the absence of express authorization being given by them to do so. The bald statement by the respondent company that the subsidiaries had no independent volition of their own, therefore, cannot be accepted. Thus, they can neither be alleged to have committed a volte face nor can they be said to have approbated and reprobated by their conduct. Further, the other debenture holders and the debenture trustee were never taken into confidence at that stage.

# 14. In this regard, the terms of the DTD assume significance. Clause 33 of the DTD is titled ‘Modifications to these presents’. As per clause 33.1, the terms of the DTD could not be amended without the prior written consent of the debenture trustee and the debenture holders, through ‘approved instructions’. The phrase ‘approved instructions’ is defined in clause 1.1 of the DTD to mean the instructions of the debenture holders to the debenture trustee, which have been approved pursuant to the provisions set out in Schedule 2, titled ‘Provisions for the Meetings of the Debenture Holders’. Clause 22 in Schedule 2 provides that a meeting of the debenture holders shall, inter alia, have the power, amongst others, to sanction any compromise or arrangement proposed to be made between the respondent company and the debenture holders. Clause 23 therein specifically provides that the power set out in clause 22 shall be exercisable by a resolution passed at a meeting of the debenture holders duly convened and held in accordance with the provisions therein contained and carried by a majority of not less than three-fourths of the persons voting thereat upon a show of hands or if a poll is demanded by a majority, representing not less than three-fourths in value of the votes cast, on such poll and such a resolution is called a ‘Special Resolution’.

# 15. Clause 33.2 of the DTD states that the debenture trustee shall, before taking any action on behalf of the debenture holders or providing any consent on their behalf under any debenture document, obtain the consent of the debenture holders as per the terms of the DTD. Clause 33.3 provides that upon obtaining such approval, the debenture trustee and the respondent company shall give effect to the same by executing all necessary deed(s). Clause 33.4 is of crucial importance and states that no amendment, modification or termination of any provision of the DTD or debenture documents shall be effective unless the same is in writing and signed by or on behalf of each of the parties. Clause 37 of the DTD is titled ‘Waiver’. Clause 37.1 posits that there can be no implied waiver or impairment while clause 37.2, titled ‘Express Waiver’, states that a waiver or consent granted by the debenture trustee under the DTD would be effective only if given in writing.

# 16. Notably, the respondent company filed Commercial Suit No. 200 of 2022, as stated in its lawyer’s reply, before the Bombay High Court seeking a declaration that the DTD stood amended by virtue of the e-mails dated 16.03.2022 and 23.03.2022 and for consequential reliefs. The defendants in the said suit were the debenture trustee, ECLF, and other members of the Edelweiss group. However, by order dated 13.09.2022, a learned Judge of the Bombay High Court refused to grant an interim injunction restraining the defendants from initiating any action under the DTD and from demanding any payments thereunder. The learned Judge held that, in the absence of modification of the terms of the DTD in accordance with the method prescribed therein, the respondent company could not be said to have made out a prima facie case for restraining the defendants in the suit from exercising the rights which flowed from the DTD. The learned Judge took note of the fact that there was no compliance with clause 33 of the DTD, which required prior written consent of the debenture holders. Unfortunately, this order by the competent civil Court, which is stated to have attained finality, was casually brushed aside by the NCLT and the NCLAT.

# 17. We may also note that clause 28 of the DTD deals with ‘release of secured assets’ and clause 28.3 therein provides that, at all times until the final settlement date, the respondent company shall be entitled to release of the security interest created over the ‘additional property’, mortgaged by Variegate Real Estate Pvt. Ltd., upon payment of Rs. 50 crore by the respondent company towards redemption of the debentures. The ‘additional property’ referred to in this clause is defined in clause 1.1 as the parcel of land of 15,138 square feet situated on Turner Road, Bandra (W), Mumbai, to be mortgaged by Variegate Real Estate Pvt. Ltd. The final settlement date, as defined, means the day on which the debentures are redeemed to the satisfaction of the debenture trustee. The release of this property assumes importance as the same was construed by the NCLT and the NCLAT to be a factor weighing in favour of the respondent company’s claim that its restructuring proposal had been accepted and acted upon. However, the letter dated 29.03.2022 addressed by the debenture trustee to Variegate Real Estate Pvt. Ltd., the respondent company and Shobhit J. Rajan in relation to release of the Bandra property from the mortgage stands on a different footing as it was relatable to clause 28.3 of the DTD and not the respondent company’s restructuring proposal. The release of this property seems to have taken place upon the respondent company transferring monies towards redemption of the debentures after receiving the additional funding of Rs. 152 crore.

# 18. In terms of the law laid down by this Court in Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund and others3  [(2021) ibclaw.in 52 SC], a corporate debtor is entitled to establish that the financial debt is not due and no default had occurred in that regard to defeat a financial creditor’s application for corporate insolvency resolution process under Section 7 of the Code. However, such an exercise cannot assume an indirect way of raising a pre-existing dispute, which would be available only to ward off an operational creditor’s claim under Section 9 of the Code. There is no escaping the fact that the entire case of the respondent company is built on the so-called restructuring of the loan facility under the DTD, but it is an admitted fact that the procedure prescribed under the DTD for such modification and variation of the terms thereunder was not adhered to. We may also note that Section 62 of the Contract Act, 1872, speaks of novation of a contract when the parties to that contract agree to substitute a new contract for it, i.e., all the parties to such contract must be in consensus as to such substitution. Presently, the admitted position is that the debenture trustee and the other debenture holders were not even privy to the discussion as to the modification of the DTD at the relevant time, let alone being consenting parties thereto. The question of ‘estoppel’ being pressed into service by the respondent company against ECLF and the other debenture holders also does not arise as any waiver of the terms stipulated in the DTD had to be in accordance with the procedure prescribed therein, under clause 33, i.e., by way of a written document. Admittedly, there is no written document to support such a plea.

# 19. Further, the NCLAT’s inference that the respondent company was entitled to claim a legitimate expectation that the moratorium and release of properties would be acted upon by the debenture trustee and the other debenture holders is equally without merit. The DTD prescribed a detailed method for modification of the terms thereof and would not stand altered by any such expectation based on the unilateral exchange between the respondent company and ECLF, which did not fructify to a crystalised commitment even on the part of ECLF. ECLF’s e-mail dated 30.03.2022 put the respondent company on notice that, though it was agreeable to the restructuring proposal and the grant of a moratorium, it would need to run the entire process internally based on the overall resolution process in compliance with the terms of the DTD. Therefore, the respondent company could not have assumed that ECLF had already agreed to the restructuring proposal without further ado and that the same was binding upon all concerned. In this regard, the observations made by the NCLAT against ECLF are without basis as the aforestated communication from ECLF to the respondent company demonstrates that no promise was held out by it as to the restructuring and all that was stated was that the proposal would be considered as per due procedure.

# 20. The conclusion drawn by the NCLAT as to the debenture trustee colluding with the debenture holders does not hold water as the debenture trustee was enjoined by the DTD to protect the interest of the debenture holders. Even on facts, the question of collusion between them was not made out. The NCLAT’s notion that the debenture trustee was required to act with fairness and protect the interest of the respondent company is contrary to the duty and obligation cast upon the debenture trustee under the DTD, which is to protect the interests of the debenture holders. The finding that the debenture trustee acted in unison with the debenture holders in catalysing their dubious designs to drag the respondent company towards insolvency is, therefore, incorrect. The adverse remarks made against the debenture trustee are, accordingly, set aside.

# 21. Though, the NCLAT was persuaded to record that the respondent company, having received Rs. 600 crore of the Rs. 850 crore under the DTD, had already repaid Rs. 508.48 crore, it lost sight of the passage of time, whereby the principal coupled with the interest due were much higher, resulting in gross disparity between what was claimed by the respondent company and the reality of the amount actually due and payable by it.

# 22. Ordinarily, this Court would not choose to reappreciate a matter on facts when the jurisdictional National Company Law Tribunal and, in appeal, the National Company Law Appellate Tribunal have recorded concurrent findings. The exception to this self-imposed rule would be when the perversity of such concurrent findings is clearly established. We find the present case to be one such case, where the perversity of the findings recorded by the NCLT and by the NCLAT is glaring and manifest, beseeching interference by this Court at the second appellate stage.

# 23. We, accordingly, hold that the NCLT and the NCLAT erred in ignoring the binding terms of the Debenture Trust Deed dated 27.03.2018 and in reframing the terms thereof on the strength of surmises, conjectures and assumptions, which were not borne out on facts and were completely unsustainable in law. Company Petition (IB) 922/MB/C-I/2022 filed by Catalyst Trusteeship Limited, the debenture trustee, deserved to be admitted under Section 7 of the Code.

# 24. In consequence, the order dated 03.02.2023 passed by the National Company Law Tribunal, Mumbai Bench-I, and the judgment dated 16.04.2025 passed by the National Company Law Appellate Tribunal, Principal Bench, New Delhi, are set aside. Company Petition (IB) 922/MB/C-I/2022 is restored to the file of the National Company Law Tribunal, Mumbai Bench-I, and the same shall be admitted by way of a separate order. Necessary further steps shall be initiated thereafter as per due procedure.

The appeal is allowed in the aforestated terms.

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Nikhil Sachdeva vs Navtej Jhamb & Ors - Relief sought in the present Application is, in substance, in the nature of an order akin to attachment before judgment. Such a remedy is a well-recognised extraordinary civil remedy governed by specific statutory conditions. In the absence of any express incorporation of such power under the Code in the context of Section 66 proceedings, the same cannot be read into the statute by implication or through invocation of inherent powers.

  NCLT Chd. (2026.08.13) in Nikhil Sachdeva vs Navtej Jhamb & Ors  [I.A.(IBC)/478 (CH)/ 2026 in  CP (IB) No. 329/Chd/Pb/2023] held that;

• The statutory scheme of Section 66 of the Code clearly contemplates a final adjudication on liability as a pre-condition for any direction of contribution. The provision does not, either expressly or by necessary implication, confer any power to direct pre-emptive attachment, freezing, or restraint over personal assets of individuals prior to such adjudication.

•  Inherent powers are procedural in nature and cannot be invoked to enlarge, expand, or override substantive statutory jurisdiction. Rule 11 of the NCLT Rules cannot be employed to create a remedy which is otherwise absent in the Code, particularly where the legislature has consciously not provided for any mechanism akin to attachment before judgment in proceedings under Section  66 of the Code.

• The absence of a pre-adjudicatory attachment mechanism does not defeat the provision; rather, it reflects a legislative choice to balance insolvency objectives with protection of property rights of individuals, ensuring that coercive consequences follow only upon determination of liability.

• The reliance placed by the Applicant on the doctrine of incidental and ancillary powers is misplaced. Incidental powers can only supplement an existing jurisdiction; they cannot be used to create substantive jurisdiction where none exists. The power to direct contribution after adjudication under Section 66 cannot be stretched to imply a power to freeze personal assets prior to determination of liability.

• In view of the foregoing analysis, it is held that the present Application seeks reliefs which are beyond the statutory competence of this Tribunal, as they amount to pre-adjudicatory restraint over personal assets of third parties without any finding under Section 66 of the Code.

• Relief sought in the present Application is, in substance, in the nature of an order akin to attachment before judgment. Such a remedy is a well-recognised extraordinary civil remedy governed by specific statutory conditions. In the absence of any express incorporation of such power under the Code in the context of Section 66 proceedings, the same cannot be read into the statute by implication or through invocation of inherent powers.

Excerpts of the Order; 

# 1. The present Application is filed by Nikhil Sachdeva, Resolution Professional of Jhamb Enterprises Pvt. Ltd. (hereinafter referred to as the Applicant/RP) under section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code) read with Rule 11 of National Company Law Tribunal Rules, 2016 (hereinafter referred to as the “NCLT Rules”) by inter-alia praying to direct the Respondents to furnish particulars of all assets owned by them; to restrain the Respondents from selling, disposing, alienating, transferring, gifting or in any way encumbering the assets as detailed in the application etc so as to make the same available for satisfaction of the quantum of recovery as enumerated in the accompanying Application filed under Section 66 of the Code etc .

# 2. Facts in brief, leading to the filing of the present Application, are as follows:

(a) It is stated that during the examination of transactions undertaken bythe Corporate Debtor, in terms of Regulation 35A of the CIRP Regulations, the RP formed an opinion that certain transactions carried out by the suspended Directors conferred undue benefits upon themselves and the Respondents at the expense of the Corporate Debtor, which comes under the purview of Section 66 of the Code. It is alleged that the suspended Management and the Respondents carried out various fraudulent transactions, including round-tripping of funds, diversion and non-handover of fixed assets, undervalued and fraudulent transfer of immovable properties, diversion of rental income, and creation of irrecoverable receivables from related parties. The total value of such transactions has been estimated at approximately ₹10.56 crore, for which liability has been attributed to the concerned Respondents under the Application filed under Section 66 of the Code.The Applicant has mentioned the details of the property owned by the Respondents in the Application with the Copies of Jamabandi annexed as Annexure- A-1 with the Application.

(b) It is contended that the adjudication process for an application filed U/s 66 of the Code is time consuming process involved, the Present Application has been moved. The Respondents are aware of the benefits allegedly derived by them from the Corporate Debtor, which, if found to be hit by Section 66 of the Code, may be required to be restored to the assets of the Corporate Debtor. The Applicant further submitted that he apprehends that the Respondents may alienate or transfer their assets during the pendency of the Section 66 application, thereby frustrating any order directing contribution to the assets of the Corporate Debtor. It is therefore prayed that the Respondents be restrained from creating third-party rights in their assets and be directed to disclose any other assets owned by them. Such protection is necessary to prevent creation of rights in favour of bona fide purchasers, which may impede recovery and execution of any order passed under Section 66 of the Code. 

(f) The Applicant submitted that no prejudice would be caused to the Respondents if such restraint is granted, as the proposed order would merely prohibit creation of third-party rights and would not affect their possession or enjoyment of the properties. Reliance is placed on Rule 11 of the NCLT Rules which preserves the inherent powers of the Tribunal to pass such orders as may be necessary to secure the ends of justice and prevent abuse of the process of the Tribunal. And failure to grant the interim relief would cause irreparable loss to the Applicant, as the assets may no longer be available for  recovery if transferred. The Applicant submitted that the balance of convenience lies in its favour and that a prima facie case exists based on the examination of transactions undertaken by the Respondents and the benefits allegedly derived by them, which are stated to be hit by Section 66 of the Code.

# 3. The Respondent Nos. 1, 2, 4 and 5 by opposing the Application, have filed a Reply by inter-alia contending as follows:

(a) It is alleged that the RP has acted in a biased, frivolous and vexatious manner throughout the CIRP. The RP has consistently sided with one group of directors, while disregarding the submissions of the other suspended Directors and has filed multiple Applications with the intent to harass them and their family Members. He has filed the Application under Section 66 of the Code as well as the present Application on 01.04.2026, nearly eighteen months after commencement of the CIRP, without furnishing any explanation for such delay, and is now seeking urgent reliefs not contemplated under the Code.

(b) It is alleged that the RP has acted beyond the scope of his statutory powers by seeking restraint orders against personal assets of individuals, including family members, who are not connected with the management of the Corporate Debtor. Reliance has been placed on the decision of the NCLT, Mumbai Bench in Bank of India v. Vishal Ghisulal Jain & Ors. to contend that a RP is required to act in an unbiased and responsible manner.

(c) It is contended that the properties sought to be restrained are personal assets of the Respondents and not assets of the Corporate Debtor. The Resolution Professional’s own pleadings acknowledge that the respondents “own” the said properties, and the revenue records (Jamabandi) annexed as Annexure A-1 clearly establish individual ownership in favour of the respective Respondents and third parties, with no mention of the Corporate Debtor anywhere in the title documents. The properties at Village Lalanwali (Fazilka) stand recorded in the names of Respondent Nos. 6 and 7 and are also mortgaged to HDFC Bank Ltd., while the land at Village Iyali Khurd (Ludhiana) is held in fractional individual shares by private persons, and the properties at Village Jattanwali are likewise shown as personally owned parcels. In all these records, the Corporate Debtor has no ownership, title, or interest whatsoever. In such circumstances, no jurisdiction can be exercised over these personal properties under insolvency proceedings, and merely because the individuals are connected to the Corporate Debtor does not render their independent assets liable to restraint.

(d) The Respondent further submitted that the moratorium under Section 14 of the Code is limited strictly to the assets of the Corporate Debtor and does not extend to the personal properties of directors, promoters, or third parties. The Hon’ble Supreme Court in Today Homes and Infrastructure Pvt. Ltd. (2021) has clarified that the moratorium cannot be used to interfere with or freeze personal assets of individuals, as such powers are not contemplated under the Code. It is further settled in Embassy Property Developments Pvt. Ltd. v. State of Karnataka (2020) 13 SCC 308 that the NCLT has limited jurisdiction and cannot act as a civil court to adjudicate or restrain third-party or personal properties unconnected with the Corporate Debtor. Similarly, in S. Rajendran v. Deputy Commissioner of Income Tax (Benami Prohibition) (2026) SCC OnLine SC, the Hon’ble Supreme Court reiterated that the NCLT cannot exercise jurisdiction over assets governed by other statutory or legal regimes.

(e) It is stated that proceedings U/s 66 proceedings are at a very preliminary stage with no adjudication, no evidence tested, and no finding of wrongful trading. Despite this, the RP seeks to freeze personal assets worth Rs.13.10 Crore, which amounts to pre-judging liability. Section 66(1) of the Code only permits directions for contribution to the assets of the Corporate Debtor after adjudication, and does not authorise interim freezing or attachment of personal assets. Hence, the relief sought is wholly beyond the scope of the Code and is liable to be rejected.

(f) They have opposed invocation of Rule 11 of the NCLT Rules, 2016 to expand substantive jurisdiction of the Tribunal beyond what is expressly provided under the IBC. The Hon’ble Supreme Court, including in the Byju’s decision (2024), has cautioned that Rule 11 of the NCLT Rules cannot be used to bypass statutory procedure or confer powers not vested by the statute. The Respondent Nos. 4 and 5 are merely spouses of certain Respondents, have no connection with the management or affairs of the Corporate Debtor, and were never directors or employees, making the attempt to restrain their assets wholly unjustified. Further, the properties in question are already subject to existing civil court injunctions and mortgage arrangements, and therefore parallel proceedings before this Tribunal amount to duplication and forum shopping. In any event, it is well settled that the Corporate Debtor has no ownership or interest in the subject properties, the Tribunal’s jurisdiction under Sections 60(5) and 66 of the Code is limited, Section 66 of the Code only contemplates post-adjudication contribution and not interim restraint, and Rule 11 cannot be used to override or enlarge statutory limits; accordingly, the Application is without merit and liable to be dismissed.

# 4. The Respondent Nos. 6 to 9 , have also opposed the Application by filing their Reply by inter-alia stating as follows:

(a) The present Application is ex facie untenable and beyond the statutory scope of the Resolution Professional under the Code. It is founded entirely on IA No. 477/2026 filed under Section 66 of the Code. The Respondents, being independent third parties to the alleged transactions, have no nexus with the insolvency of the corporate debtor so as to attract proceedings under Section 66 of the Code. Further, the disputes relating to the impugned transactions are already pending adjudication before a competent Civil Court, and therefore, in view of Section 60(5) of the Code, this Adjudicating Authority ought not to re-adjudicate or interfere with matters sub judice before a civil forum. Reliance is placed on the judgment of the Hon’ble Supreme Court in Gluckrich Capital Pvt. Ltd. v. State of West Bengal & Ors., (2023) ibclaw.in 75 SC, which reiterates that Section 66 cannot be extended to third parties.

(b) The instant Application is misconceived and based on a selective and misleading interpretation of facts. The sole allegation rests on the order dated 29.02.2016 passed by the Learned Civil Judge (Senior Division), Fazilka, wherein the Respondent No. 6 was recognized as a lawful tenant in continuous and peaceful possession of the subject property since 2011. The said Respondent had been regularly paying rent to the Corporate Debtor till March 2014 and remained ready and willing to discharge subsequent rent obligations; however, the Corporate Debtor deliberately failed to issue receipts, thereby attempting to create a false narrative of unauthorised occupation. The Civil Court, having already adjudicated upon the issue and affirmed the Respondent’s tenancy rights, also restrained interference with such peaceful possession except in accordance with due process of law. In these circumstances, the Resolution Professional cannot seek to reopen or circumvent binding civil court findings through proceedings under Section 60(5) or Section 66 of the Code, as such an exercise would amount to overreach and substitution of the jurisdiction of competent civil/revenue courts. The present application is thus legally untenable and beyond the scope of the Adjudicating Authority, which cannot assume the role of a rent or civil court to reclassify a judicially determined tenancy as fraudulent.

(c) It is stated that sole allegation in IA No. 477/2026 filed U/s 66 of the Code pertains to an Agreement to Sell dated 06.08.2021 concerning agricultural land measuring 18 Acres 7 Marla. Upon alleged non-compliance of the said agreement by the Corporate Debtor, the Answering Respondents instituted a civil suit (CS-102-2025) before the Learned Civil Judge (Sr. Division), Fazilka, seeking possession by way of specific performance, wherein vide Order dated 10.02.2025, an ex-parte ad-interim Order of status quo was granted with respect to alienation of the suit property, the Court having found a prima facie case in favour of the plaintiffs. The attempt made by the Resolution Professional’s seeking rejection of the plaint filed under Order VII Rule 11 CPC and vacation of the interim order was already declined by the Learned Civil Court. In this background, reliance is placed on the law laid down by the Hon’ble Supreme Court in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta, (2021) 7 SCC 209, which clarifies that the jurisdiction under Section 60(5) of the Code extends only to disputes arising solely from or in relation to insolvency proceedings, and cannot be used to usurp the jurisdiction of competent civil courts in matters existing dehors the insolvency process. Accordingly, the present proceedings, which pertain to an independent civil dispute already pending adjudication before the competent court, fall outside the ambit of the residuary jurisdiction under Section 60(5) of the Code, and therefore this Tribunal lacks jurisdiction to entertain the same.

# 5. The Applicant has filed written submissions by inter-alia contending as follows:

(a) It is contended that Section 66 of the Code comprises two distinct provisions. Section 66(1) applies to “any persons” who were knowingly parties to fraudulent conduct of business of the Corporate Debtor, whereas Section 66(2) applies specifically to directors or partners who knew or ought to have known that insolvency was unavoidable and failed to exercise due diligence to minimise loss to creditors. It is contended that accepting the Respondents' interpretation that Section 66 applies only to directors would render Section 66(1) otiose, as the legislature has consciously used the broader expression “any persons” to extend liability beyond directors and partners.

(b) Reliance is placed on judicial precedents including Tridhaatu Kirti Developers LLP v. S. Arihant Nenawati, wherein proceedings under Section 66 were upheld even against third parties, and the order was affirmed by the Hon’ble Supreme Court. Further reliance is placed on Royal India Corporation Ltd. and Sangeeta Jatinder Mehta v. Kailash Shah, wherein the NCLAT reiterated that Section 66(1) covers persons knowingly involved in fraudulent transactions. The Applicant further submitted that the NCLT possesses inherent power to grant interim relief in aid of final relief, and such power includes restraining alienation of assets to preserve the subject matter of proceedings. It is submitted that Rule 11 of the NCLT Rules, 2016 confers wide inherent jurisdiction to pass orders necessary to secure the ends of justice. In the present case, such interim protection is necessary to prevent frustration of recovery proceedings under Section 66.

(e) The Applicant submitted that during pendency of proceedings, certain Respondents executed sale deeds transferring substantial agricultural land despite knowledge of the ongoing proceedings, thereby attempting to defeat possible recovery and create third-party rights. It is further submitted that the respondents are continuing to alienate assets to frustrate the proceedings, and such conduct demonstrates mala fide intent to render IA No. 478 of 2026 infructuous. The Applicant contends that the sale deeds contain false recitals that no proceedings were pending in respect of the property, despite the respondents being aware of the pending proceedings before this Tribunal. Reliance is placed on Surender Singh Bhatia v. Vitol SA and related proceedings to submit that the NCLT has previously exercised interim jurisdiction under Section 66, including restraining respondents during pendency of proceedings.

(f) It is contended that absence of interim protection would render the proceedings under Section 66 of the Code ineffective, as respondents ma dispose of assets before final determination. The RP further submits that the relief sought is limited in nature, as no restraint is sought on use or enjoyment of properties, but only on alienation or creation of third-party rights during pendency of proceedings. It is finally submitted that the conduct of the respondents clearly indicates a continuing attempt to defeat recovery proceedings, and therefore immediate interim protection is necessary to preserve the subject matter and ensure effective adjudication of IA No. 477 of 2026.

# 6. The Respondent Nos. 1, 2, 4 & 5 have also filed written submissions by inter alia contending as follows:

(a) The central issue before this Tribunal is whether, in exercise of jurisdiction under the Code, the NCLT can order attachment or freezing of personal properties of natural persons, including spouses and third parties, on the basis of a pending and unadjudicated application under Section 66 of the Code. It is submitted that such power is not available under the statute. The Code does not contemplate any pre-adjudicatory restraint over personal assets, and recognising such a power would amount to judicial expansion of jurisdiction beyond the legislative scheme and in violation of Article 300-A of the Constitution of India. Section 66(1) of the Code empowers the Tribunal, upon a final finding of fraudulent trading or wrongful conduct, to direct persons responsible to make such contribution to the assets of the corporate debtor as may be deemed appropriate. The statutory remedy is thus limited to a post-adjudication monetary liability in the nature of contribution. It does not authorise attachment, freezing, or creation of any charge over personal properties of individuals. The Resolution Professional cannot, therefore, seek pre-emptive restraint over assets before any finding of liability is recorded. Any enforcement or execution mechanism can arise only after a final order under Section 66 of the Code is passed and not at the stage of mere allegation.

(b) The reliance on the expression “any persons” under Section 66(1) of the Code cannot be stretched to justify interim attachment of properties. Even assuming without admitting that third parties may be proceeded against in appropriate cases, such interpretation cannot be used to confer a power of  pre-judgment freezing, which is a distinct and far more intrusive remedy not contemplated under the Code. The present Application under IA No. 478 of 2026 is not for adjudication of liability but for interim attachment during pendency of IA No. 477 of 2026, which is impermissible in law. 

(c) The Hon’ble Supreme Court in Gluckrich Capital Pvt. Ltd. v. State of West Bengal has clarified the scope and limitations of Section 66 of the Code, and its interpretation is binding under Article 141 of the Constitution. Further, in Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Tata Consultancy Services v. Vishal Ghisulal Jain, the Hon’ble Supreme Court has consistently held that the jurisdiction of the NCLT is limited and cannot extend to matters which are dehors the insolvency process or beyond the express provisions of the Code.

(d) It is further submitted that Rule 11 of the NCLT Rules cannot be invoked to create substantive jurisdiction where none exists under the statute. Inherent powers are procedural in nature and cannot be used to confer new substantive remedies such as attachment before adjudication. The Hon’ble Supreme Court in GLAS Trust Company LLC v. Byju Raveendran has cautioned against misuse of inherent powers to bypass statutory safeguards. Similarly, Section 424 of the Companies Act and reliance on Order 38 Rule 5 CPC are misconceived, as the Tribunal is bound by the provisions of the IBC, which does not incorporate any mechanism for pre-judgment attachment in Section 66 proceedings. Even otherwise, Order 38 Rule 5 CPC is an extraordinary remedy requiring strict satisfaction of conditions such as intent to defeat execution, which are neither pleaded nor established in the present case.

(e) The doctrine of incidental and ancillary powers cannot be invoked to justify the relief sought. Incidental powers can only supplement express statutory powers and cannot be used to create substantive jurisdiction or remedies which the legislature has consciously omitted. Accepting the RP’s contention would effectively convert the NCLT into a court of unlimited equity jurisdiction, permitting attachment of personal assets in every case where a

future liability is alleged. Such an interpretation is impermissible and contrary to the scheme of the Code. The reliance placed by the RP on various judgments is wholly misplaced and distinguishable on facts and law. Decisions such as Vitol SA, Future Retail, Royal India Corporation, and others cited pertain either to corporate assets of the corporate debtor, final adjudications after evidence, or entirely different factual contexts involving regulatory or criminal proceedings. None of the judgments lay down any principle permitting interim freezing of personal properties of third parties, including spouses or unrelated persons, in pending Section 66 proceedings. On the contrary, the authorities relied upon by the Respondents consistently emphasise the limited jurisdiction of the Tribunal and the high threshold required for interference under the Code.

ANALYSIS AND FINDINGS

# 6. We have considered the rival submissions and perused the record and have also gone through the relevant provisions of the Code and the rules and regulations made thereunder.

# 7. The present Application has been filed by the Resolution Professional seeking, inter alia, directions to compel disclosure of assets by the Respondents and a restraint upon the Respondents from alienating, transferring, or creating third-party interests over their personal properties during the pendency of an Application under Section 66 of the Code. The foundational basis of the present Application is an apprehension that the Respondents may frustrate any eventual order of contribution that may be passed under Section 66 of the Code.

# 8. The main question that arises for consideration is whether, in exercise of jurisdiction under Section 60(5) of the Code read with Rule 11 of the NCLT Rules, this Tribunal is empowered to grant interim measures in the nature of freezing or restraining alienation of personal properties of natural persons, including third parties and relatives, prior to any adjudication under Section 66 of the Code.

# 9. In the present case, the relief sought is not confined to preservation of the assets of the Corporate Debtor, but extends to restraining alienation of personal properties of individuals, including persons who are not shown to be part of the management of the Corporate Debtor and whose assets are admittedly recorded in revenue records as independent properties. The admitted position is that the properties sought to be restrained do not form part of the assets of the Corporate Debtor and are not subject to any established charge or encumbrance in favour of the Corporate Debtor

# 10. It is seen that section 66 of the Code, on which reliance is placed by the Applicant, is a substantive provision which contemplates a finding by the Adjudicating Authority that business of the Corporate Debtor has been carried on with intent to defraud creditors or for fraudulent purposes, and upon such finding, empowers the Authority to direct persons who were knowingly parties to such conduct to make contribution to the assets of the Corporate Debtor. The statutory scheme of Section 66 of the Code clearly contemplates a final adjudication on liability as a pre-condition for any direction of contribution. The provision does not, either expressly or by necessary implication, confer any power to direct pre-emptive attachment, freezing, or restraint over personal assets of individuals prior to such adjudication.

# 11. The attempt of the Applicant to invoke Rule 11 of the NCLT Rules to justify the grant of such interim restraint is also misconceived. Inherent powers are procedural in nature and cannot be invoked to enlarge, expand, or override substantive statutory jurisdiction. Rule 11 of the NCLT Rules cannot be employed to create a remedy which is otherwise absent in the Code, particularly where the legislature has consciously not provided for any mechanism akin to attachment before judgment in proceedings under Section  66 of the Code. The submission that absence of such interim power would render Section 66 ineffective is equally untenable. The efficacy of Section 66 lies in its ability to impose liability upon persons found guilty of fraudulent conduct after due adjudication. The absence of a pre-adjudicatory attachment mechanism does not defeat the provision; rather, it reflects a legislative choice to balance insolvency objectives with protection of property rights of individuals, ensuring that coercive consequences follow only upon determination of liability.

# 12. This Tribunal is also mindful of the settled legal position that personal properties of third parties and natural persons cannot be brought within the sweep of insolvency jurisdiction merely on the basis of allegations of indirect benefit or association with the Corporate Debtor. To permit such an extension at an interim stage, without adjudication of foundational facts under Section 66, would amount to prejudging liability and would result in serious civil consequences against persons who have not yet been found guilty of any fraudulent conduct. The reliance placed by the Applicant on the doctrine of incidental and ancillary powers is misplaced. Incidental powers can only supplement an existing jurisdiction; they cannot be used to create substantive jurisdiction where none exists. The power to direct contribution after adjudication under Section 66 cannot be stretched to imply a power to freeze personal assets prior to determination of liability.

# 13. It is further significant that the relief sought in the present Application is, in substance, in the nature of an order akin to attachment before judgment. Such a remedy is a well-recognised extraordinary civil remedy governed by specific statutory conditions. In the absence of any express incorporation of such power under the Code in the context of Section 66 proceedings, the same cannot be read into the statute by implication or through invocation of inherent powers. This Tribunal also takes note of the settled principle that jurisdiction under Section 60(5) of the Code cannot be exercised to adjudicate upon or interfere with independent civil rights in respect of properties which are already subject to civil court proceedings, revenue records, or third-party interests. The disputes concerning title, possession, and alienation of such properties are matters squarely within the domain of civil courts and other competent forums.

# 14. In view of the foregoing analysis, it is held that the present Application seeks reliefs which are beyond the statutory competence of this Tribunal, as they amount to pre-adjudicatory restraint over personal assets of third parties without any finding under Section 66 of the Code. The Application, therefore, seeks to expand the scope of jurisdiction under Section 60(5) of the Code and Rule 11 of the NCLT Rules in a manner not contemplated by law. Filing of the Present Application & S.66 Application simultaneously on 01.04.2026 amounts to multiplicity of proceedings as an Application seeking interim order, if any, can be filed only in S 66 Application & not separately. This Tribunal finds that no case is made out for grant of the reliefs sought and the present Application is not only non maintainable but also lacks merits and thus it is liable to be dismissed.

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