NCLAT & NCLT Bolster IBC Integrity With Key Rulings on Debt, Resolution Plans, and Misuse of Process

In a series of significant pronouncements, India's insolvency tribunals have delivered crucial judgments that reinforce the structural integrity of the Insolvency and Bankruptcy Code (IBC), 2016. The National Company Law Appellate Tribunal (NCLAT) and various benches of the National Company Law Tribunal (NCLT) have issued directives aimed at curbing procedural misuse, clarifying the definition of "financial debt," upholding the finality of approved resolution plans, and defining the scope of judicial inquiry in matters involving other enforcement agencies. These rulings collectively signal a move towards more robust, efficient, and equitable insolvency proceedings.

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NCLAT Stays Insolvency on Double-Debt Deposit, Prioritizing Resolution Over Liquidation

In a notable order demonstrating a pragmatic approach to corporate rescue, the NCLAT in Delhi has stayed insolvency proceedings against an aviation services company, Bird Delhi General Aviation Services Pvt. Ltd., after its suspended director offered to deposit double the amount of the claimed debt.

The case, Gaurav Bhatia, Suspended Director... v. Martin Consulting LLC & Ors. , involved an operational debt of Rs. 54.03 lakh, pending since 2019. The NCLT Chandigarh had initiated the Corporate Insolvency Resolution Process (CIRP) on November 7, 2025. However, on appeal, the suspended director, Gaurav Bhatia, offered to deposit Rs. 1.09 crore—twice the claimed amount with interest—as a demonstration of the company's bona fides and financial stability.

The appellate bench, led by Chairperson Justice Ashok Bhushan, recognized this offer as a sufficient ground for interim relief. Observing the appellant's commitment, the bench stated, “The Appellant having offered to deposit Rs. 1,09,10,000/- without prejudice to the rights and contentions of the Appellant, we are of the view that the Appellant has made ground for grant of interim relief.”

The appellant argued that the company is financially robust, with a turnover of Rs. 50 crore, and that insolvency would be a disproportionate remedy for the disputed debt, which is already the subject of another legal forum. By staying the NCLT's order and directing the deposit, the NCLAT has underscored the IBC's primary objective: to resolve distress and revive a corporate debtor where possible, rather than pushing a solvent company into the rigors of CIRP over a contested operational debt. The matter is scheduled for a further hearing on December 10, 2025.

"Tom & Jerry Show" Ends: NCLAT Fines Obstructive Applicant, Urges Blacklisting Mechanism

In a stern rebuke of dilatory tactics, the NCLAT imposed a hefty penalty of Rs. 15 lakh on Astral Agro Ventures, a Prospective Resolution Applicant (PRA), for derailing the CIRP of Megi Agro Chem Ltd. The tribunal condemned the PRA's conduct as a "pretentious" attempt to turn the serious legal process into a "Tom & Jerry show."

Astral Agro Ventures had expressed interest in the CIRP but repeatedly sought extensions and failed to submit a resolution plan. After the Committee of Creditors (CoC) approved the sole plan submitted by another entity, Astral Agro challenged the approval, alleging disqualifications against the successful applicant.

The NCLAT bench of Justice N Seshasayee and Arun Baroka held that a PRA who fails to participate constructively by submitting a plan becomes "procedurally irrelevant" and loses its locus standi to object to the CoC's commercial decisions. The tribunal noted, “Merely because CIRP proceeding is a proceeding in rem, it still does not accommodate those who by their conduct or otherwise have been rendered irrelevant in procedure... the mere fact that a PRA or an unsuccessful RA establishes a relationship with the CIRP procedurally, still may not grant them the license to gate crash into a CIRP proceeding.”

The judgment strongly reinforces the principle that stakeholders must act in good faith. More significantly, the NCLAT recommended that the Insolvency and Bankruptcy Board of India (IBBI) consider framing regulations to blacklist PRAs who engage in such obstructive behavior, a move that could significantly deter the misuse of the resolution process.

Breach of Compromise Deed Is Not a Financial Debt, Clarifies NCLT

The NCLT New Delhi has delivered a crucial clarification on what constitutes a "financial debt" under Section 5(8) of the IBC. In the matter of Samridhi Realty Homes Private Ltd. v. Nexgen Infracon Pvt. Ltd. , the tribunal ruled that a mere obligation to pay arising from a breach of a compromise deed does not automatically qualify as a financial debt.

The case involved an initial loan, part repayment, and a subsequent compromise deed for the outstanding amount. When the corporate debtor defaulted on the deed's installments, the financial creditor initiated a Section 7 application.

The tribunal, comprising Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi, dismissed the application, emphasizing that the cornerstone of a financial debt is "disbursement against consideration for the time value of money." A compromise deed, while creating a payment obligation, does not in itself represent a new disbursement for the time value of money; it is merely an agreement to settle a pre-existing liability. The bench observed, “A mere breach of the terms of an agreement, including a Settlement or Compromise Deed under which payment becomes due, would not constitute a financial debt in the absence of such disbursement.”

This ruling prevents the IBC from being used as a tool for enforcing contractual settlements, guiding creditors to pursue remedies under other applicable laws for breaches of compromise agreements.

Sanctity of Approved Plans: NCLT Rejects Modification Under Guise of Implementation

Reaffirming the finality of an approved resolution plan, the NCLT Delhi has ruled that Section 60(5) of the IBC cannot be invoked to modify or revisit its terms. The decision came in a petition by the Successful Resolution Applicants (SRAs) for the Shubhkamna City project, who sought directions for a structural audit and subsequent repairs.

The tribunal held that such directions would inevitably alter the financial and temporal framework of the plan, which has already attained finality. Citing the doctrine of colourable legislation—"what cannot be done directly can also not be done indirectly"—the NCLT refused to entertain the plea.

The bench referred to the Supreme Court’s landmark ruling in Ebix Singapore Pvt. Ltd. v. Committee of Creditors of Educomp Solutions Ltd. (2022) , which established that an approved resolution plan is irrevocable. Any post-approval modification would undermine the predictability and certainty that are fundamental to the IBC's success. This judgment serves as a strong reminder to resolution applicants that their plans, once approved, are binding and cannot be amended to account for unforeseen costs or challenges discovered post-approval.

NCLT's Duty to Verify Facts: Tribunal Must Confirm ED Attachment Before Denying Asset Release

In a case clarifying the intersection of the IBC and the Prevention of Money Laundering Act (PMLA), the NCLAT has directed the NCLT Mumbai to first verify whether a property was indeed attached by the Enforcement Directorate (ED) before refusing its release to a Successful Resolution Applicant (SRA).

The dispute involved a flat that the SRA of DSK Southern Projects Pvt. Ltd. claimed was not part of the ED's provisional attachment order. The NCLT had denied the release, citing a Supreme Court order that continued existing attachments, and placed the onus on the SRA to seek clarification from the ED.

The NCLAT overturned this, stating that the adjudicating authority has a "utmost duty" to adjudicate the facts before it. The appellate bench observed that the NCLT “committed manifest illegality in not ascertaining as to whether the aforesaid flat was in fact provisionally attached by the ED.” It clarified that the Supreme Court's order only pertained to existing attachments. If the flat in question was not on the attachment list, the NCLT had the jurisdiction to order its release. This directive reinforces the NCLT's role as an adjudicating body responsible for factual determination, rather than deferring its duty to other agencies or the applicants themselves.