Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT) has held that the National Company Law Tribunal (NCLT), Mumbai committed a clear error in refusing to release a Bangalore-based flat in favour of the successful resolution applicant (SRA) of DSK Southern Projects Pvt. Ltd. without first determining whether the property had actually been provisionally attached by the Enforcement Directorate (ED). The order was delivered by a Bench comprising Justice Mohd Faiz Alam Khan (Judicial Member) and Indevar Pandey (Technical Member).

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The dispute concerns Flat No. 2402 in the Mantri Pinnacle project, which the applicants—comprising the director of the corporate debtor and the successful resolution applicant consortium (Shiv Charan, Bharti Agarwal and Pushplata Bai)—claimed had not been attached by the ED. They argued that since the property did not form part of any provisional attachment order, it should be released to them under the approved resolution plan.

The corporate insolvency resolution process (CIRP) against DSK Southern Projects began on 9 December 2021. The consortium’s resolution plan was subsequently approved by the Committee of Creditors and the NCLT. Earlier, the ED had provisionally attached 14 unsold flats valued at around ₹32.51 crore, but the flat in question was not among those listed. The applicants therefore approached the NCLT seeking release of the property on the ground that it did not fall within the Supreme Court’s interim order, which continued only existing ED attachments.

The NCLT rejected the application, observing that release of the property would violate the Supreme Court’s directions preserving ongoing attachments. It also placed the burden on the SRA to approach the ED for indemnity and left the matter to the discretion of the authorities. Aggrieved by this, the consortium filed the present appeal before the NCLAT.

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The NCLAT found that the NCLT failed to discharge its duty to verify whether the property was actually under attachment before declining relief. The appellate tribunal held that the adjudicating authority “committed manifest illegality” by not ascertaining whether the flat had been provisionally attached by the ED under its order dated 14 February 2019 or under the subsequent order dated 19 February 2024. The Bench observed: “Without ascertaining the same, liberty has been given to the appellant to approach the respondent, while it was the utmost duty of the adjudicating authority to adjudicate whether the aforesaid property was actually provisionally attached by the ED.”

The NCLAT further noted that the Supreme Court’s interim protection extends only to properties that were under attachment. Since Flat No. 2402 was not reflected in the attachment order, the NCLT ought to have examined the matter independently and determined whether the property was free of encumbrance. If so, it had full jurisdiction to direct release of the property in favour of the SRA as part of resolution plan implementation.

The tribunal stressed that the NCLT could not shift the responsibility onto the resolution applicant or require an indemnity when the crucial issue—whether the property was actually attached—remained unverified. The failure to undertake this verification impeded the effective implementation of an already approved resolution plan.

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The NCLAT set aside the NCLT’s order and remanded the matter back to the adjudicating authority, directing it to verify whether Flat No. 2402 was ever provisionally attached by the ED. The NCLT has been instructed to reconsider the applicant’s plea for release of the property after carrying out this verification in accordance with law.

Appearance

For Appellant : Advocate G Aniruth Purusothaman

For Respondent : Advocate Ayush J Rajani, Adv

Cause Title: Mohan Reddy Bhumi Reddy Gari. Versus STCI Finance Limited

Case No: Company Appeal (AT) (Insolvency) No. 1279 of 2025

Coram: Justice Mohd Faiz Alam Khan (Judicial Member), Indevar Pandey (Technical Member).