Justice Ashok Bhushan Reappointed as NCLAT Chair Amid Key Rulings on IBC Procedure

NEW DELHI – The Appointments Committee of the Cabinet (ACC) has approved the re-appointment of former Supreme Court Judge, Justice Ashok Bhushan, as the Chairperson of the National Company Law Appellate Tribunal (NCLAT). The decision ensures leadership continuity at the apex tribunal for corporate insolvency and competition law until July 4, 2026, when Justice Bhushan will attain the age of 70.

The re-appointment comes as benches led by Justice Bhushan deliver significant judgments clarifying critical aspects of the Insolvency and Bankruptcy Code, 2016 (IBC), particularly concerning procedural fairness in real estate insolvency and the statutory obligations of liquidators. These rulings underscore the NCLAT's role in refining the contours of India's evolving insolvency regime.

Justice Bhushan, who retired from the Supreme Court on July 4, 2021, first assumed the role of NCLAT Chairperson on November 8, 2021. His career trajectory includes serving as a permanent Judge of the Allahabad High Court, Chief Justice of the Kerala High Court, and his elevation to the Supreme Court of India on May 13, 2016. His extended tenure is expected to bring stability to the NCLAT as it navigates an increasingly complex landscape of corporate restructuring and liquidation cases.

Real Estate Insolvency: NCLAT Reinforces Project-Specific Approach

In a major development for the real estate sector, an NCLAT bench comprising Chairperson Justice Ashok Bhushan and Member (Technical) Barun Mitra recently set aside insolvency proceedings initiated against realty firm Mahagun India. The appellate tribunal remanded the matter back to the National Company Law Tribunal (NCLT) for fresh consideration, emphasizing the need for procedural fairness and adherence to the principle of project-specific insolvency.

The case stemmed from a petition filed by IDBI Trusteeship Services Ltd against Mahagun over a default of ₹256.48 crore. The NCLT had admitted the insolvency plea, an order which Mahagun challenged. The NCLAT's decision was heavily influenced by several factors:

1. Procedural Fairness: The NCLT had admitted the petition without granting Mahagun adequate time to file a detailed reply, instead restricting the parties to written submissions. The NCLAT found this approach wanting, ordering that the firm be given a week to file a comprehensive reply and status report.

2. Project-Specific Insolvency: The bench noted the Supreme Court's precedent in the Mansi Brar Fernandes case, which holds that insolvency in real estate should ideally be project-specific to protect the interests of homebuyers and financial creditors in other, financially sound projects of the same developer.

3. Rights of Third-Party Stakeholders: The appellate tribunal took cognizance of intervention applications from homebuyers of Mahagun's other projects and from Aditya Birla Capital Ltd, a financial creditor for four separate, operational projects. These stakeholders argued that a corporate-wide insolvency would jeopardize their investments and interests.

By setting aside the NCLT's admission order, the NCLAT has allowed these intervenors to present their cases before the NCLT. The judgment is a crucial reminder that the "Order, dated August 5, 2025, is set aside and petition... revived before the Adjudicating Authority for fresh consideration," ensuring that the broader implications of admitting a real estate company into insolvency are thoroughly examined.

Liquidator's Powers Curtailed: Prior NCLT Approval for Private Sale is Mandatory

In another significant ruling that clarifies the procedural bounds of the liquidation process, the same NCLAT bench held that a liquidator cannot conduct a private sale of assets without obtaining prior permission from the Adjudicating Authority (NCLT).

The case, Orissa Alloy Steels Pvt. Ltd. v. S.M. Steels & Power Ltd. & Ors. , involved a Swiss Challenge auction where the liquidator proceeded with a private sale process based on the approval of the Stakeholders Consultation Committee (SCC), which had voted 99.92% in favour. However, the NCLT had not granted prior permission for this private sale.

The NCLAT upheld the NCLT's decision to set aside the sale, delivering a strong message on the supremacy of statutory regulations over the commercial wisdom of the SCC. The bench's findings centered on several key legal principles:

• Mandatory Nature of Prior Permission: The tribunal was unequivocal in its interpretation of the IBBI (Liquidation Process) Regulations, 2016. It held, " Regulation 33(2)(d) is categorical that the Liquidator may sell assets by private sale only after obtaining prior permission of the Adjudicating Authority. It is not open to the Liquidator to conduct or conclude the process and then seek ex post facto approval. " This establishes a clear procedural safeguard, preventing liquidators from presenting the NCLT with a fait accompli.

• Procedural Integrity and Maximisation of Value: The NCLAT criticized the compressed timelines and excessive Earnest Money Deposit (EMD) requirement in the Swiss Challenge process, noting it "stamped out meaningful participation of bidders which in turn impeded procuring the highest possible price." The ruling reaffirms that the liquidation process must be designed to be inclusive and competitive to achieve the IBC's core objective of asset value maximisation.

• Balancing Commercial Wisdom and Law: While acknowledging the importance of the SCC's commercial wisdom, the tribunal clarified that it "cannot override the statutory safeguards under the IBC and Regulations." This delineates the roles of the SCC and the Adjudicating Authority, positioning the NCLT as the ultimate arbiter of procedural legality.

Analysis and Future Implications

Justice Bhushan's re-appointment and these recent landmark rulings signal a period of judicial emphasis on procedural propriety and the balancing of stakeholder interests within the IBC framework.

For the real estate sector, the Mahagun ruling provides much-needed clarity and protection for complex projects. It prevents a single project's default from triggering a domino effect across a developer's entire portfolio, thereby safeguarding the investments of countless homebuyers and lenders in viable projects. It also serves as a directive to NCLTs to ensure that corporate debtors are afforded a fair opportunity to present their case before drastic measures like insolvency admission are taken.

For insolvency professionals, the Orissa Alloy Steels judgment is a critical lesson in compliance. It establishes a bright-line rule that the liquidator's powers are not absolute and are circumscribed by the regulations and the oversight of the Adjudicating Authority. Seeking prior judicial sanction for actions like private sales is now non-negotiable, a move that enhances transparency and accountability in the liquidation process.

As Justice Bhushan continues his leadership at the NCLAT, the legal community will be watching closely. His tenure is poised to further shape the jurisprudence of corporate law in India, with a clear focus on reinforcing the statutory framework of the IBC and ensuring that its implementation is fair, transparent, and effective in achieving its stated goals.