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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