The National Company Law Appellate Tribunal (NCLAT) has unequivocally affirmed that the National Company Law Tribunal (NCLT) retains the power to revoke an approved resolution plan at any stage of the corporate insolvency resolution process (CIRP), provided there’s a proven instance of fraud—a principle rooted in Section 65 of the Insolvency and Bankruptcy Code (IBC).
The ruling emanates from the case of Expert Realty Professionals Private Limited vs. Logix Infrastructure Private Limited, concerning a real estate development known as the Blossom County project in Noida, comprising 17 towers with nearly 2,400 units. Expert Realty claimed it had entered a buy-back arrangement with Logix Infrastructure, investing approximately ₹15 crore for 1.37 lakh sq.ft. of built-up area. Alleging non-payment, Expert Realty filed an insolvency petition under Section 7 of the IBC in July 2023. The NCLT admitted the petition and initiated CIRP proceedings, leading to the appointment of an Interim Resolution Professional.
Homebuyers, however, challenged the process under Section 65 of the IBC, arguing that the petition was not genuine but a collusive maneuver aimed at evading obligations to the Noida Authority and the allottees. They urged a recall of the initiation, citing fraudulent and mala fide conduct. Agreeing with these arguments, the NCLT not only recalled the petition but also imposed a penalty of ₹55 lakh on Expert Realty for misusing the CIRP mechanism.
Expert Realty appealed this decision before the NCLAT. Upholding the NCLT’s order, the appellate tribunal reinforced that any act of fraud nullifies the entire resolution process, including the order approving the resolution plan. The tribunal reasoned that fraud “vitiates everything,” rendering the stage of the CIRP process immaterial when evaluating a Section 65 application.
Central to the NCLAT’s view was the overlapping directorship and partnerships between Logix Infrastructure and Expert Realty, indicating collusion rather than a bona fide insolvency application. Additionally, crucial documents submitted in support of the petition were found to be unstamped, unregistered, and lacking proper legal safeguards.
By recognizing the power to recall an approved plan, the NCLAT has underscored the judiciary's commitment to preserving the integrity of the insolvency process. It affirmed that the objective of the IBC is not obstructed by technical finality in resolution plans if more fundamental flaws—such as fraud—exist.
This decision thus serves as a critical reminder that CIRP orders, while carrying significant finality, remain subject to judicial review where justice and integrity demand it. In effect, the tribunal reaffirmed that the IBC is not a tool for manipulation or evasion, but a disciplined framework built on transparency and trust.
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