The court emphasized that a corporate debtor's restructuring proposal must receive proper written approval from all debenture holders as stipulated in the Debenture Trust Deed, failing which the initiation of insolvency proceedings is warranted under Section 7 of the Code.

JUDGMENT :

SANJAY KUMAR, J

1. Refusal to initiate corporate insolvency resolution process under Section 7 of the Insolvency and Bankruptcy Code, 2016 ¹ [For short, ‘the Code’] , 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