Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLT) 974

NATIONAL COMPANY LAW TRIBUNAL
Prabhat Kumar, Member (Technical), Sushil Mahadeorao Kochey, Member (Judicial)
Aegis Resolution Services Private Limited – Appellant
Versus
Praxis Home Retail Limited – Respondent
COMPANY PETITION (IB) NO. 865 OF 2022|IA 5144/2025

Advocates:
For the Applicant : Rohit Gupta, Dhrupad Vaghani, Hayatni Mohite, Ajit M.K
For the Respondent No.1: Pulkit Sharma, S. Dixit, Satyajit K.
For the Respondent No.2: Harsh M., Petrushka Dasgupta, Krishna B, Janhavi Kalpesh

Section 66 IBC enables NCLT to annul specific fraudulent pre-CIRP leases violating mortgage terms, imposed by related parties with intent to defraud creditors via long lock-ins and penalties; applicable to directors/third parties; Regulation 35A timeline directory.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Section 66 - Fraudulent and wrongful trading - Lease deed executed pre-CIRP with related party for 21 years at low rent (Rs.2 lakhs/month or 4% revenue share), 10 crore penalty clause for early termination, violating mortgage indenture restrictions on restrictive leases without lender consent - Held as fraudulent transaction under Section 66(1) with intent to defraud creditors by encumbering prime asset; directors liable under Section 66(2) for failing due diligence knowing insolvency prospect - Timeline under Regulation 35A directory, not barring application - NCLT empowered to set aside such transactions and direct contributions, including against knowingly participating third parties/related persons - Lease set aside, tenant directed to vacate within 30 days, pay dues, no penalty liability on lessor. (Paras 14, 20, 33, 35, 38)

(B) Section 60(5)(c) r/w Rule 11 NCLT Rules - Onerous lease detrimental to creditor interests disclaimable - But Section 66 invoked for fraudulent purpose overriding disclaimer, enabling annulment and possession recovery. (Paras 16, 38)

(C) CIRP Regulations - Regulation 35A timeline directory; delay condonable if genuine reasons, prioritising asset maximisation over strict timelines. (Para 14)

Facts of the case:
Resolution Professional filed application under Section 66 challenging pre-CIRP lease of ground floor commercial space (44,500 sq.ft.) in mall (corporate debtor's sole asset) to related party tenant for 21-year lock-in at undervalued rent, with hefty dispossession penalty, executed days before principal borrower's NPA classification where corporate debtor was guarantor. Possession delayed due to court receiver; CoC concerned over value erosion. Respondents defended as bona fide commercial renewal, alleged delay, lack of fraud proof, no jurisdiction over third parties.

Findings of Court:
Lease fraudulent, contravening mortgage clauses barring restrictive leases without consent; intent to defraud evident from timing, related party, long lock-in, disproportionate penalty exceeding total rent paid, no capex proof. Transaction not mere imprudence but mala fide encumbrance. RP application maintainable despite delay.

Issues: (i) Maintainability post Regulation 35A timeline; (ii) Jurisdiction under Section 66 to annul lease and direct contributions against tenant/directors; (iii) Proof of fraudulent/wrongful trading in lease as business decision; (iv) Effect of mortgage violation and related party status.

Ratio Decidendi: Section 66 empowers inquiry into business conducted fraudulently, allowing orders against knowing parties (including related third parties) for contributions without setting aside if unascertainable, but specific fraudulent leases encumbering assets examinable for annulment; mortgage breach, suspicious timing pre-default, undervaluation, restrictive clauses establish fraud intent under 66(1), director knowledge/no due diligence under 66(2); directory timelines uphold CIRP objectives.

Result: Application allowed; lease deed set aside, tenant to hand over possession/control within 30 days, pay occupation rentals, lessor not liable for penalty clause.

Table of Content
1. rp seeks to annul fraudulent lease under section 66 (Para 1 , 10 , 16)
2. factual background of lease and cirp initiation (Para 2 , 3 , 4 , 5 , 6 , 7 , 9)
3. respondents contest fraud allegations and jurisdiction (Para 11 , 12)
4. regulation 35a timeline is directory (Para 14 , 15)
5. section 66 empowers contribution for fraudulent trading (Para 17 , 18 , 19 , 20)
6. lease with related party shows fraudulent intent (Para 21 , 22 , 23 , 24)
7. low rent and long lock-in diminish asset value (Para 25 , 26)
8. lease violates mortgage indenture restrictions (Para 29 , 30 , 31 , 32)
9. transaction fraudulent under sections 66(1) and 66(2) (Para 33 , 34 , 35 , 36 , 37 , 38)

ORDER

1. This Application IA 5144/2025 is filed on 1.11.2025 by Aegis Resolution Services Private Limited (“Applicant/RP”), the Resolution Professional of Ojas Tradelease and Mall Management Private Limited (“Corporate Debtor”), Under the Provision of Section 66 of the Insolvency and Bankruptcy Code, 2016 (“Code”), seeking following reliefs :-

a) Declare and hold that the Lease Deed dated 23^rd March 2022 executed between the Corporate Debtor and Respondent No. 1, in respect of an area admeasuring 44,500 sq. ft. carpet area (equivalent to 4,134 sq. mtrs.) situated on the Ground Floor of "The Acropolis Mall", Thaltej, Ahmedabad, is onerous and detrimental to the interest of the Corporate Debtor and its creditors;

b) Direct that the said Lease Deed be disclaimed, annulled, and terminated forthwith under Section 60(5)(c) of the Code read with Rule 11 of the NCLT Rules as being prejudicial to the Corporate Debtor and contrary to the objectives of the Code; COMPANY PETITION (IB) NO. 865 OF 2022 c) Direct Respondent No. 1 to forthwith hand over peaceful and vacant possession of the Leased Premises to the Applicant, in his capacity as the Resolution Professional of the Corporate Debtor;

d) Declare that any demand, claim, or liability arising out of the said Lease Deed shall stand extinguished upon such termination and shall not constitute an operational or financial debt within the meaning of the Code;

e) Restrain Respondent No. 1, its agents, representatives, or affiliates from creating any third-party rights, encumbrances, or interest in the Leased Premises, or from otherwise interfering with the possession, control, or management of the Corporate Debtor's assets;.

f) Permit the Applicant to take such steps as may be necessary for securing, maintaining, and commercially utilising the Leased Premises in the best interest of the Corporate Debtor and its creditors and stakeholders;

g) Declare that the transaction underlying the Lease Deed dated 23rd March 2022 executed between the Corporate Debtor and Respondent No. I constitutes a fraudulent and wrongful transaction within the meaning of Sections 66 of the Code:

h) Direct Respondents Nos. 1 to 6, jointly and severally, to make contribution to the assets of the Corporate Debtor under Sections 66(1) and 66(2) of the Code by paying a minimum sum of INR 19,55,00,000/- (Indian Rupees Nineteen Crore Fifty Five Lakh Only) towards the losses and damages caused to the Corporate Debtor from the 'Rent Commencement Date' under the Lease Deed i.e., 01^st January 2022 till 01^st November 2025 along with an interest of 21% p.a.; COMPANY PETITION (IB) NO. 865 OF 2022

i) Further direct Respondents Nos. 1 to 6, jointly and severally, to make contribution under Sections 66(1) and 66(2) of the Code for an additional sum equivalent towards the future losses and damages that the Corporate Debtor would suffer for the remaining tenure of the Lease Deed, had the transaction not been disclaimed or annulled; and

j) Pass such further and other orders as this Hon'ble Tribunal may deem fit, proper, and expedient in the interest of justice, and to give full effect to the provisions and objectives of the Code.

2. On 23rd March 2022, the Corporate Debtor executed a Lease Deed with Praxis Home Retail Limited ("Respondent No. 1"), a related party under the Fu

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2026 Supreme(Online)(NCLT) 974

NATIONAL COMPANY LAW TRIBUNALPrabhat Kumar, Member (Technical), Sushil Mahadeorao Kochey, Member (Judicial)Aegis Resolution Services Private Limited – AppellantVersusPraxis Home Retail Limited – RespondentCOMPANY PETITION (IB) NO. 865 OF 2022|IA 5144/2025

Section 66 IBC enables NCLT to annul specific fraudulent pre-CIRP leases violating mortgage terms, imposed by related parties with intent to defraud creditors via long lock-ins and penalties; applicable to directors/third parties; Regulation 35A timeline directory.

NATIONAL COMPANY LAW TRIBUNAL
Prabhat Kumar, Member (Technical), Sushil Mahadeorao Kochey, Member (Judicial)
Aegis Resolution Services Private Limited – Appellant
Versus
Praxis Home Retail Limited – Respondent
COMPANY PETITION (IB) NO. 865 OF 2022|IA 5144/2025