The court affirmed that once debt and default are established under Section 7 of the IBC, admission into CIRP is mandatory, preventing misuse of the process as merely a recovery mechanism.

JUDGMENT :

R. MAHADEVAN, J.

1. The present appeals are directed against the final judgment and order dated 01.07.2025 passed by the National Company Law Appellate Tribunal¹ [For short “NCLAT”] Principal Bench, New Delhi, in Company Appeal (AT) (Insolvency) No. 2261 of 2024.

2. By the impugned judgment, the NCLAT set aside the order dated 06.11.2024 passed by the Adjudicating Authority, National Company Law Tribunal² [For short “NCLT”] Ahmedabad Bench, in CP (IB) No. 140 (AHM) / 2024, and directed admission of the application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016³ [For short “IBC”] thereby initiating the Corporate Insolvency Resolution Process⁴ [For short “CIRP”] against the appellant in C.A. No. 10012 of 2025 – Takshashila Heights India Private Limited. The NCLAT further rejected the intervention application filed by the appellant in C.A. No. 10261 of 2025 – Elegna Co-operative Housing and Commercial Society Ltd.⁵ [For short “Society”] on the ground that it lacked locus standi to intervene in the aforesaid company appeal.

3. For the sake of convenience, the parties to the present appeals are arrayed as under:

Brief facts

4. The necessary facts leading to the filing of the present appeals are as follows:

4.1. The appellant in C.A. No. 10012 of 2025 (Corporate Debtor) availed financial assistance of Rs. 70 crores from ECL Finance Ltd. (Original Lender), on 19.07.2018 under two term loan facilities, for the purpose of developing a residential-cum- commercial project titled “Takshashila Elegna”. To secure the said facilities, the Corporate Debtor and its promoters executed loan agreements, promissory notes, and other security documents on 25.07.2018 (for Term Loan – I of Rs. 40 crores) and 26.09.2018 (for Term Loan – II of Rs.30 crores). An Indenture of Mortgage was subsequently executed on 04.09.2020 in favour of the Original Lender to secure repayment of the said loans. There was delay in repayment of the loan instalments and the Corporate Debtor made its last payment on 30.09.2021, after which the loan accounts were classified as Non-Performing Assets (NPA) on 30.12.2021.

4.2. On 09.05.2022, the Original Lender executed an Assignment Agreement transferring all its rights, title, and interest in the said loan to Edelweiss Asset Reconstruction Company Ltd.⁶ [For short “EARCL”] (Financial Creditor). Following the same, the Financial Creditor issued a recall and invocation of guarantee notice dated 31.05.2022, demanding a sum of Rs. 53,03,18,487/- from the Corporate Debtor and its personal guarantors against Term Loans I and II. They also initiated recovery proceedings by filing of O.A. No. 367 of 2022 before the Debts Recovery Tribunal, Ahmedabad, and issued a demand notice dated 21.07.2022 under Section 13 (2) of the SARFAESI Act, 2002 for Rs. 57,24,96,064/- as on 30.06.2022.

4.3. Pursuant to commercial discussions, the Corporate Debtor and the Financial Debtor entered into a Restructuring – cum – One Time Settlement Agreement on 23.05.2023, under which the Corporate Debtor agreed to discharg