NCLAT Upholds Eviction of Subsidiaries from Corporate Debtor's Properties During Liquidation, Affirming NCLT Jurisdiction Under Section 60(5) IBC

In a significant ruling for insolvency practitioners and corporate entities, the National Company Law Appellate Tribunal (NCLAT) Principal Bench in New Delhi has dismissed appeals by two subsidiaries of the corporate debtor, Fivebro Water Services Pvt. Ltd. and Gondwana Engineers Ltd., upholding the National Company Law Tribunal (NCLT) Ahmedabad's order for their eviction from the debtor's properties in Ahmedabad and Mumbai. The decision, delivered by a bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member Technical), reinforces the broad residuary jurisdiction of the NCLT under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (IBC), particularly in matters directly linked to liquidation proceedings. This comes amid a series of recent NCLAT judgments emphasizing the primacy of insolvency forums over civil courts in handling asset-related disputes during corporate distress.

The case underscores the tribunal's stance that eviction orders and recovery of rental dues from related parties occupying a corporate debtor's assets fall squarely within the NCLT's purview when they arise from or relate to the liquidation process. By invalidating post-moratorium lease and license agreements as attempts to circumvent IBC safeguards, the NCLAT has sent a clear message to suspended managements and affiliates: attempts to retain control over debtor assets post-CIRP admission will not stand. This ruling aligns with broader trends in NCLAT jurisprudence, such as recent decisions limiting insolvency scopes to specific projects or upholding penalties for bid rigging, highlighting the tribunal's role in streamlining corporate resolutions.

Case Background

The dispute centers on Doshion Pvt. Ltd., the corporate debtor (CD), which was admitted into the Corporate Insolvency Resolution Process (CIRP) by the NCLT Ahmedabad on August 31, 2021, triggering a moratorium under Section 14 of the IBC. Prior to this, Doshion had entered into an unregistered lease deed on September 29, 2020, with its subsidiary Fivebro Water Services Pvt. Ltd. for its Ahmedabad premises, valid for two years. Separately, on July 20, 2021, it executed a license agreement with another subsidiary, Gondwana Engineers Ltd., for its Mumbai premises, spanning five years. Both agreements were merely notarized, lacking mandatory registration under applicable laws, including the Maharashtra Rent Control Act for the Mumbai property.

Following CIRP admission, the Resolution Professional (RP) issued notices on November 24, 2021, demanding that Fivebro and Gondwana deposit monthly rents and license fees into the CD's CIRP account, along with arrears. The subsidiaries initially confirmed compliance on December 14, 2021, but payments lapsed, prompting the RP to file IA No. 63/2022 against Fivebro and IA No. 94/2022 against Gondwana before the NCLT. These applications sought eviction, recovery of outstanding dues (including rent, license fees, AMC charges, and society dues), and inclusion of the properties in the liquidation estate.

With resolution failing, Doshion was ordered into liquidation on November 21, 2023, and Bijay Murmuria was appointed Liquidator. The Liquidator pursued the IAs, arguing that the properties were CD assets under Section 35 of the IBC, which empowers the Liquidator to take custody of all assets and actionable claims like rents. The NCLT, in a common order dated June 21, 2024, allowed both applications, directing immediate vacation of the premises and payment of dues. Aggrieved, Fivebro and Gondwana filed appeals under Section 61 of the IBC—Company Appeal (AT) (Insolvency) No. 1730/2025 and No. 1814/2025, respectively—challenging the NCLT's jurisdiction and the validity of the eviction orders.

The timeline of events reveals a pattern of urgency by the suspended management. Notably, on August 31, 2021—the very day of CIRP admission—a fresh 10-year registered lease was executed with Fivebro for the Ahmedabad property, despite the original lease still having a year left. This move, registered in the evening after the court's morning pronouncement, raised suspicions of mala fide intent to shield the asset from liquidation.

Parallel proceedings before the Gujarat High Court in Special Civil Application No. 9402/2024 further illuminated the dues issue. The High Court, in an interim order on June 28, 2024, directed the subsidiaries to deposit rents but ultimately dismissed the petition on October 13, 2025, affirming dues were payable and leaving remedies to the IBC framework. This backdrop highlights the interconnected web of related-party transactions in insolvency, a recurring theme in recent NCLAT rulings, such as those restricting insolvency to specific projects in cases like Ansal Properties.

Arguments Presented

The appellants, represented by Advocates Arjun R. Sheth and Somya Jain, mounted a robust challenge centered on jurisdictional overreach. They argued that the disputes stemmed from contractual breaches under lease and license agreements, falling under civil courts or arbitration clauses embedded in the documents. Invoking the Supreme Court's ruling in Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta (2021) 7 SCC 209, they contended that Section 60(5) IBC's jurisdiction is limited to matters with a "direct nexus" to insolvency, not general contractual disputes like rent defaults or eviction. The fresh Ahmedabad lease, they claimed, was a bona fide rectification of the unregistered 2020 agreement, executed just before moratorium to comply with registration laws, not to evade liquidation.

For the Mumbai property, Gondwana asserted that evaluating the license agreement's compliance with the Maharashtra Rent Control Act exceeded NCLT's remit, rendering the void-ab-initio declaration erroneous. Both appellants denied intentional non-payment, attributing delays to disputes over municipal taxes, GST inputs, and the CD's failure to cover property taxes or maintenance under the agreements. They furnished bank statements showing partial payments and argued that eviction was coercive, ignoring their valid occupancy rights. In essence, they portrayed the NCLT's intervention as usurping civil remedies, potentially frustrating the IBC's goal of efficient resolution by entangling it in peripheral contract law.

Countering sharply, the Liquidator, supported by Advocates Kunal Vaishnav and Yuvraj Thakur, emphasized the agreements' invalidity and direct link to liquidation. The 2021 Ahmedabad lease was void under Section 14(1)(b) IBC, prohibiting asset encumbrance post-moratorium, and smacked of collusion between the CD's suspended board (linked to directors Ashit and Rakshit Dhirajlal Doshi) and subsidiaries to exclude the property from the estate. The timing—registration hours after CIRP admission—betrayed mala fides, especially with the original lease subsisting.

For Mumbai, the unregistered license violated mandatory provisions, making occupation unlawful and justifying Liquidator action under Section 35 to preserve assets. The Liquidator highlighted ignored payment demands since September 2021 and foiled possession attempts on October 15, 2025, as evidence of obstruction. Drawing on Section 238 IBC's non-obstante clause and Section 231's bar on civil suits, they argued NCLT's residuary powers under Section 60(5)(c) encompassed eviction and rent recovery as questions of law/fact arising from liquidation. The Gujarat High Court's directives validated dues, underscoring breach. This position mirrors recent NCLAT affirmations of CCI penalties in bid-rigging cases, where circumstantial evidence sufficed without formal agreements, extending to insolvency asset disputes.

Legal Analysis

The NCLAT's reasoning meticulously navigates the jurisdictional contours of the IBC, affirming that while Section 60(5) does not confer plenary powers, it robustly covers disputes integral to insolvency or liquidation. The tribunal dissected the Ahmedabad lease's timing, noting the suspended management's awareness of reserved orders on the Section 7 petition (August 24, 2021) yet proceeding with registration on August 25 and full execution on August 31 post-admission. This violated moratorium prohibitions on creating legal rights over assets, rendering the lease "an eyewash" with ulterior motives to thwart liquidation.

Echoing Gujarat Urja , the NCLAT clarified that "relating to" or "arising out of" insolvency includes measures preserving asset value, like evicting unauthorized occupants. It distinguished this from pure contractual feuds, emphasizing nexus: here, properties as CD assets demanded Liquidator custody under Section 35(1)(b), with rents as actionable claims. The tribunal relied on its prior decision in Jhanvi Rajpal Automotive Pvt. Ltd. v. RP of Rajpal Abhikaran Pvt. Ltd. (CA(AT)(Ins) No. 1417/2022), where similar post-CIRP lease attempts were invalidated, even if tenures overlapped—relevant as both cases involved related-party maneuvers to retain control.

For Mumbai, the unregistered license's non-compliance with state rent laws voided it ab initio, but adjudication remained within NCLT's fold as it facilitated liquidation progress. The NCLAT rejected appellants' arbitration plea, noting IBC's overriding effect (Section 238) bars parallel forums when insolvency nexus exists. This analysis distinguishes between general disputes (e.g., unrelated breaches) and those impacting estate integrity, aligning with precedents like Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407, which prioritized unified insolvency adjudication to avert delays.

Recent NCLAT trends bolster this: in upholding CCI penalties against Klassy Enterprises for bid rigging via IP overlaps and funding rivals—without written cartels—it showed circumstantial evidence suffices for enforcement. Similarly, in guarantor notices under SARFAESI, technical misdescriptions (e.g., calling a director a guarantor) don't vitiate if substance demands payment. Here, unregistered documents and post-moratorium actions provide analogous "plus factors" justifying NCLT intervention over civil courts.

The ruling clarifies: moratorium halts new encumbrances, protecting the estate from insider dilutions. It draws a line—NCLT won't micromanage contracts but will intervene where occupation hinders maximization of asset value, a core IBC objective.

Key Observations

The NCLAT's judgment is replete with incisive observations underscoring IBC's protective framework:

• On the Ahmedabad lease's invalidity: "The motive and intent of the Corporate Debtor and the Appellant with respect to the timing of the execution of the lease agreement and the tenure of the fresh agreement not only lacked transparency but was in the teeth of moratorium provisions of IBC. This by itself constituted sufficient basis for holding the fresh lease agreement to be invalid and unenforceable."

• Affirming jurisdiction: "Section 60(5) of the IBC vests a wide jurisdiction on the Adjudicating Authority to decide any application by or against the Corporate Debtor on any question of priorities or any question of law or facts arising out of or in relation to the insolvency resolution of the Corporate Debtor."

• On Liquidator powers: "It is the entrenched obligation and right of the Liquidator under Section 35 of IBC to take possession of the assets of the Corporate Debtor, hence, the filing of IA No.94 of 2022 by the Liquidator seeking the intervention of the Adjudicating Authority by invoking Section 60(5)(c) was in order."

• Citing Gujarat Urja : "NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor. However, in doing so, we issue a note of caution to NCLT and NCLAT to ensure that they do not usurp the legitimate jurisdiction of other courts... The nexus with the insolvency of the corporate debtor must exist."

These excerpts encapsulate the tribunal's balanced yet firm approach, prioritizing expeditious liquidation without overstepping.

Court's Decision

In its January 7, 2026, judgment, the NCLAT dismissed both appeals as "devoid of merit," upholding the NCLT's June 21, 2024, order in toto. Fivebro and Gondwana were directed to vacate the Ahmedabad and Mumbai premises forthwith, hand over peaceful possession to the Liquidator, and settle all outstanding rents, license fees, AMC, society, and municipal dues. No costs were imposed.

The implications are profound for insolvency practice. Liquidators gain clearer authority to reclaim related-party occupied assets, curbing potential asset-stripping via sham agreements. Suspended directors and subsidiaries must now exercise heightened caution post-CIRP, as tribunals will scrutinize timing and intent rigorously. This decision may reduce parallel litigations, channeling disputes to NCLT for swifter resolutions—vital given IBC's emphasis on timelines to preserve value.

For future cases, it sets precedent: unregistered or post-moratorium instruments encumbering assets are presumptively invalid if nexus to insolvency is shown. In a landscape of rising corporate defaults, this bolsters creditor confidence, akin to NCLAT's recent curbs on expansive insolvency in Ansal Properties, focusing processes on tainted projects. Ultimately, it advances IBC's goal of a "single window" for insolvency, minimizing forum-shopping and ensuring equitable asset distribution.