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2026 Supreme(Online)(NCLAT) 641

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
Ashok Bhushan, Chairperson, Barun Mitra, Member (Technical)
Bindu Kapoor Suspended Director Bliss House Private Limited – Appellant
Versus
Sapan Mohan Garg Interim Resolution Professional Bliss House Private Limited – Respondent
Company Appeal (AT) (Insolvency) No. 2040 of 2025 | Company Appeal (AT) (Insolvency) No. 585 of 2026

Advocates:
For the Appellants/Petitioners:Mr. Krishnendu Datta, Sr. Advocate, Mr. Abhay Chattopadhyay, Mr. Udipto Koushik Samrah, Mr. Kumar Shubham, Mr. Harsh Gurbani
For the Respondents:Mr. Sandeep Bajaj, Ms. Aakanksha Nehra, Mr. Raj Shakya, Mr. Shubham Jaiswal, Mr. Abhijeet Sinha, Sr. Advocate, Mr. Ritesh Kumar, Mr. Sidhant Kumar Marwah, Ms. Ekssha Kashyap, Mr. Shivam Sharan, Mr. Naman Gowda, Mr. Siddhant Ahirwal, Ms. Mamta Binani

Once a default in repayment under a loan recall notice is established, the pendency of a challenge to an arbitral award confirming the debt does not bar the admission of a Section 7 IBC application. The IBC is a remedy independent of execution.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 7 - Corporate Insolvency Resolution Process (CIRP) - Admission of application - Debt and default - Loan recall notice - Arbitral award as evidence of default - Fresh cause of limitation - The adjudicating authority is empowered only to verify whether a default has occurred or not; based upon its decision, it must admit or reject an application under Section 7(5). (Para 20)

(B) Insolvency and Bankruptcy Code, 2016 - Section 7 - Scope of inquiry - Mandatory admission - Once debt and default are established, admission is mandatory, and no discretion survives. The ratio of Innoventive Industries Ltd. v. ICICI Bank and E.S. Krishnamurthy v. Bharath Hi-Tech Builders P. Ltd. is reiterated. (Paras 20, 21)

(C) Insolvency and Bankruptcy Code, 2016 - Section 7 - Application pending challenge to Arbitral Award - Default founded on loan recall notice - The filing of an application under Section 34 of the Arbitration & Conciliation Act, 1996 challenging an arbitral award does not bar a separate Section 7 application when the default was initially committed upon non-compliance with a loan recall notice, independent of the award. (Paras 17, 18, 22)

(D) Arbitration & Conciliation Act, 1996 - Sections 34 and 36 - Arbitral award - Execution - Use as a fresh cause of action for Section 7 IBC - An arbitral award gives rise to a fresh period of limitation for filing a Section 7 application, and the financial creditor is not obliged to execute the award alone; the Code and the arbitration act operate in separate spheres with concurrent remedies. (Paras 26, 27) (E) Insolvency and Bankruptcy Code, 2016 - Section 7 - Limitation - Arbitral award creates fresh cause of action - The arbitral award dated 28.02.2023 gave a fresh cause of action, and the Section 7 application filed within three years is within limitation. (Para 27)

Facts of the case:
Two appeals were filed by a suspended director against separate orders of the Adjudicating Authority (NCLT) admitting Section 7 applications filed by a financial creditor (JC Flowers Asset Reconstruction Private Limited) against two corporate debtors (Bliss Abode Pvt. Ltd. and Bliss House Pvt. Ltd.). The financial creditor had issued loan recall notices on 09.03.2020, alleging a material adverse event due to the arrest of a personal guarantor. The corporate debtors failed to pay the amounts demanded. Arbitration proceedings were initiated, culminating in awards in favor of the lenders on 28.02.2023, which the corporate debtors challenged under Section 34 of the Arbitration Act. The financial creditor then filed Section 7 applications relying on the loan recall notices and the arbitral awards. The NCLT admitted the applications, leading to these appeals.

Findings of Court:
The court found that the loan recall notice was validly issued under the contract (Clause 12.1.8) as a guarantor’s arrest constituted a material adverse effect. The debt and default were established by the non-payment of the recalled loan, not solely by the arbitral award. The pendency of a Section 34 challenge to the award does not invalidate the independent default. The court also held that the financial creditor could rely on the arbitral award as a fresh cause of action for the purposes of limitation. Applying the settled legal position, once debt and default are proved, the adjudicating authority must admit the Section 7 application.

Issues: The main issues were whether the loan recall notice was valid, whether the default could be independently established without relying on a final arbitral award, and whether the Section 7 application was maintainable while the award was under challenge under Section 34 of the Arbitration Act.

Ratio Decidendi: The court ruled that in proceedings under Section 7 of the IBC, the inquiry is limited to verifying the existence of debt and default. The fact that an underlying claim is represented by an arbitral award under challenge does not preclude the admission of the Section 7 application if a separate and earlier default (such as failure to comply with a loan recall notice) is established. The existence of an arbitral award provides a fresh period of limitation, reinforcing the right to file the application.

Result: Appeals dismissed. Both parties to bear their own costs.

ASHOK BHUSHAN, J.

These two appeals have been filed by the suspended director of the corporate debtor challenging two separate orders passed by the adjudicating authority (National Company Law Tribunal, New Delhi, Court – II) in C.P. (IB) No.474/ND/2025 dated 15.12.2025 & C.P. (IB) No.585/ND/2025 dated 21.01.2026. The adjudicating authority by the above two separate orders have admitted Section 7 application filed by the JC Flowers Asset Reconstruction Private Limited, the financial creditor herein. Appellant aggrieved by the above orders initiating Corporate Insolvency Resolution Process (“CIRP”) proceedings against the corporate debtor has filed these two appeals.

2. Brief facts of the case giving rise to these two appeals are as follows:

Comp. App. (AT) (Ins.) No. 2040/2025 i. The corporate debtor – Bliss Abode Private Limited entered into Loan Agreement dated 13.07.2017 with Indibulls Housing Finance Limited for Rs.90 crore.

ii. 4 other Loan Agreements dated 05.10.2017 were entered between the corporate debtor and Indiabulls Housing Finance Ltd. for sum of Rs.75 crore, Rs.67 crore, Rs.60 crore and Rs.83 crore respectively.

iii. As security to the loan personal guarantees were executed by the appellant Ms. Bindu Kapoor and her husband Mr. Rana Kapoor. Deed of Hypothecation dated 08.08.2019 was executed.

iv. On 23.08.2019, Memorandum of Entry (MoE) was executed which is recorded the deposit of title deed of property being 40, Amrita Shergill Marg, New Delhi with IDBI Trusteeship Services Limited as security trustee.

v. On 09.03.2020, a loan recall notice was issued to the corporate debtor – M/s. Bliss Abode Private Limited, appellant Ms. Bindu Kapoor and Mr. Rana Kapoor stating that event of default has occurred, hence the lender recall the outstanding loan totalling to Rs.388,42,96,875/- which need to be paid within 5 days from date of receipt of the notice.

No payments were made in response to the loan recall notice.

vi. Notice under Section 13(2) of the SARFAESI Act, 2002 was issued on

18.06.2020. The lender also initiated arbitration proceedings against the corporate debtor Bliss Abode Private Ltd., M/s. RAB Enterprises (India) Pvt. Ltd., Mr. Rana Kapoor and Ms. Bindu Kapoor.

vii. The sole arbitrator gave an arbitration award dated 28.02.2023 in favour of lenders holding that claimants are entitled to recover INR 453,75,24,066/- along with the interest from 19.06.2020 till date of payment. Certain other claims were allowed.

viii. Corporate debtor filed an application under Section 34 of the Arbitration & Conciliation Act, 1996 against the award dated 28.02.2023, which is stating to be pending before the Delhi High Court. The Delhi High Court has not passed any interim order in Section 34 application.

ix. The financial creditor has also filed application – Execution Petition under Section 36 of the Arbitration & Conciliation Act, 1996 seeking execution of the award on 20.11.2023.

x. On 29.03.2025, Indiabulls Housing Finance Ltd. executed an Assignment Agreement in favour of JC Flowers Asset Reconstruction Pvt. Ltd.

xi. On 23.07.2025, the financial creditor filed a Section 7 application being C.P. (IB) No.474/2025 alleging the total amount of Rs.453,75,24,066/- along with TDS and interest @11.25% per annum. In Section 7 application Part IV, the lenders have pleaded the details of sanctioned loan disbursement, loan recall notice dated 09.03.2020 as well as the arbitration award dated 28.02.2023.

xii. Notices were issued in Section 7 application, to which reply was filed by the corporate debtor objecting to Section 7 application. Adjudicating authority after hearing the parties vide order dated 15.12.2025 admitted Section 7 application and appointed the Interim Resolution Professional (“IRP”), aggrieved by which order, Comp. App. (AT) (Ins.)

No.2040/2025 has been filed.

Comp. App. (AT) (Ins.) No. 585/2026 i. Loan Agreement dated 05.09.2018 was entered into between Bliss Abode Pvt. Ltd., the corporate debtor with Indibulls Housing Finance Lt

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2026 Supreme(Online)(NCLAT) 641

Once a default in repayment under a loan recall notice is established, the pendency of a challenge to an arbitral award confirming the debt does not bar the admission of a Section 7 IBC application. The IBC is a remedy independent of execution.

Cases Referred (9)