Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(NCLT) 1217

NATIONAL COMPANY LAW TRIBUNAL
Rajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical Member
Meridian Educational Society – Appellant
Versus
Gonugunta Murali Liquidator of Butta Infrastructure Private Limited – Respondent
IA (IBC) 1473/2025 in CP (IB) No. 325/7/HDB/2020|CP (IB) No. 325/7/HDB/2020

Advocates:
For the Applicant: TK Bhaskar, Sarvani Desiraju
For the Respondents: Y. Suryanarayana, Sachin Sharma

Liquidation bidders ineligible under IBC Section 29A if related to NPA promoters; status from historical nexus in financials/transactions; post-CIRP MSME registration invalid; EMD forfeiture upheld on ineligibility.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 5(24), 5(24A), 29A(c), 29A(j), 35(1)(f), 240A - IBBI (Liquidation Process) Regulations, 2016 - Schedule I Clauses 5A, 12D - Liquidation auction - Bidder declared ineligible under Section 29A(c) r/w 29A(j) due to related party status with promoters whose account was NPA - Financial statements disclosing significant influence by key managerial personnel and relatives, historical associations, common memberships, lease waivers, and shared registrations establishing related party under Section 5(24)(f), (m) - Determination not limited to praesenti status if it defeats statutory object - Post-CIRP MSME registration by suspended management invalid; classification based on pre-CIRP financials exceeding thresholds after excluding only land, buildings, furniture/fittings - No exemption under Section 240A - EMD forfeiture upheld per auction terms and regulations. (Paras 49-100)

(B) MSMED Act, 2006 - Section 7 - Notification S.O. 2119(E) - 'Plant and machinery or equipment' includes all tangible assets except land, buildings, furniture/fittings; expansive per Income Tax Act definition - Artificial exclusion of interiors, fixtures, books impermissible. (Paras 77-88)

(C) IBC - Section 29A - Liquidator's duty to independently verify eligibility; no prior adjudication required - Proviso to Section 35(1)(f) extends ineligibility to liquidation purchasers - Historical/operational nexus cumulatively establishes control/influence. (Paras 51, 29, 62-71)

Facts of the case:
Educational society sought to set aside liquidator's rejection of its auction bid for corporate debtor's premises where it operated school under lease; EMD forfeited alleging ineligibility under Section 29A due to nexus with promoters whose NPA account predated CIRP by over a year. Society claimed independence, MSME exemption.

Findings of Court:
Society held related party; promoters ineligible under 29A(c); no valid MSME status; rejection and EMD forfeiture lawful.

Issues: Whether bidder ineligible under Section 29A(c)/(j) as connected to NPA promoters; applicability of Section 240A MSME exemption; validity of EMD forfeiture.

Ratio Decidendi: Related party status determined cumulatively from financial disclosures, associations, transactions; not strictly praesenti if contravenes IBC object; MSME status assessed pre-CIRP with proper asset computation; post-CIRP registration unauthorized.

Result: Application dismissed.

Table of Content
1. background of cirp, liquidation, and lease disputes. (Para 1 , 2 , 3 , 23 , 24 , 25 , 26 , 27)
2. applicant's challenge to section 29a ineligibility. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22)
3. liquidator's defense of ineligibility and emd forfeiture. (Para 28 , 29 , 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43)
4. post-cirp msme registration invalid. (Para 44 , 45 , 46 , 47)
5. section 29a applies to liquidation auctions. (Para 48 , 49 , 50 , 51 , 52)
6. applicant is related party; in praesenti not absolute. (Para 53 , 54 , 55 , 56 , 57 , 58 , 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66 , 67 , 68 , 69 , 70 , 71)
7. corporate debtor not msme; no section 240a exemption. (Para 72 , 73 , 74 , 75 , 76 , 77 , 78 , 79 , 80 , 81 , 82 , 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91 , 92 , 93 , 94)
8. emd forfeiture valid; application dismissed. (Para 95 , 96 , 97 , 98 , 99 , 100)

APPLICANT’S SUBMISSIONS

1. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process (CIRP) pursuant to an application filed by LIC Housing Finance Limited under Section 7 of the IBC, which came to be admitted by this Adjudicating Authority vide order dated 01.03.2021, and Mr. Krishna Komuravolu was appointed as the Interim Resolution Professional.

2. Upon failure of the CIRP, the Resolution Professional filed I.A. No. 112 of 2022 seeking liquidation of the Corporate Debtor. This Authority, vide order dated 24.02.2022, directed liquidation of the Corporate Debtor and appointed the present Respondent as the Liquidator.

3. The Applicant had entered into lease deeds with the Corporate Debtor on separate occasions to enable the Applicant to run its school in the subject premises. The Applicant describes itself as a charitable and social-objective driven educational society. In view of this nature, lease rentals were waived for a certain period and were made payable only from the year 2021.

4. Subsequent to his appointment, the Respondent Liquidator demanded payment towards alleged lease rental arrears, relying upon certain lease deeds which are forged. Despite detailed explanations and supporting documentation furnished by the Applicant, the Liquidator filed I.A. No. 643 of 2022 seeking payment of alleged lease rentals and I.A. No. 1127 of 2023 seeking eviction of the Applicant from the premises. Both applications came to be decided against the Applicant.

5. Aggrieved thereby, the Applicant preferred appeals against both the orders before the Hon’ble NCLAT, Chennai Bench. Both appeals are pending and interim orders have been granted. By virtue of the interim order in CA (AT) (Ins) No. 374 of 2024, the Applicant continues in occupation of the premises and is regularly remitting lease rentals at the rate determined by the Advocate Commissioner appointed vide order dated 18.08.2023 in I.A. No. 643 of 2022.

6. While matters stood thus, the Liquidator issued an auction notice dated 05.06.2025 proposing to auction the land and building of the Corporate Debtor admeasuring 5426.2 Sq. Yards situated at 8-2-541, Road No. 7, Banjara Hills, Hyderabad, fixing a reserve price of Rs. 71,00,00,000/- and requiring an Earnest Money Deposit (EMD) of Rs. 7,10,00,000/-, with the auction scheduled on 27.06.2025.

7. Since the Applicant has been running its school in the said premises, it bona fide believed that purchase of the property would protect continuity of educational activities and stakeholder interests. Accordingly, the Applicant expressed its interest to participate in the auction, remitted the stipulated EMD on 25.06.2025 and submitted its Expression of Interest (EOI) along with requisite documents.

8. Thereafter, vide email dated 02.07.2025, Page 42 of the Application (Annexure C), the Respondent alleged that the Applicant was ineligible under Section 29A of the Code. It was alleged that the directors/promoters of the Corporate Debtor exercised “significant influence” over the Applica

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2026 Supreme(Online)(NCLT) 1217

NATIONAL COMPANY LAW TRIBUNALRajeev Bhardwaj, Judicial Member, Sanjay Puri, Technical MemberMeridian Educational Society – AppellantVersusGonugunta Murali Liquidator of Butta Infrastructure Private Limited – RespondentIA (IBC) 1473/2025 in CP (IB) No. 325/7/HDB/2020|CP (IB) No. 325/7/HDB/2020

Liquidation bidders ineligible under IBC Section 29A if related to NPA promoters; status from historical nexus in financials/transactions; post-CIRP MSME registration invalid; EMD forfeiture upheld on ineligibility.

Cases Referred (1)