Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has refused to set aside the initiation of insolvency proceedings against Ansal Properties and Infrastructure Limited. However, the appellate tribunal has significantly curtailed the scope of the Corporate Insolvency Resolution Process (CIRP), holding that it must be confined only to projects linked to the loan securities and receivables, namely Sushant Golf City at Lucknow and three projects in Rajasthan — Ansal Royal Plaza, Orchid Plaza, and Tulip Plaza.

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The decision was rendered by a Bench comprising Judicial Member Justice Ashok Bhushan and Technical Member Barun Mitra. The tribunal observed that stretching insolvency proceedings across numerous unrelated real estate projects would be unwarranted and could severely disrupt projects that are otherwise viable and unconnected to the underlying financial debt.

The dispute traces back to two term loans amounting to ₹150 crore extended in 2016 by IL&FS Financial Services Limited to Ansal Properties. These loans were primarily sanctioned for the development of hi-tech township projects, with a substantial focus on the Mother City development at Lucknow. Following defaults in repayment, IL&FS recalled the facilities and claimed dues of more than ₹257 crore, eventually approaching the National Company Law Tribunal (NCLT), New Delhi.

By an order dated February 25, 2025, the NCLT admitted the Section 7 application and imposed a moratorium under the Insolvency and Bankruptcy Code across the entire company. This blanket moratorium triggered concern among homebuyers and development authorities, who apprehended that construction activities and handover of possession would come to a standstill even in projects that were financially sound and substantially completed.

Aggrieved by the NCLT’s decision, appeals were filed before the NCLAT by suspended director Pranav Ansal and by homebuyer Gagan Tandon. They contended that Ansal Properties had more than 90 registered projects in Lucknow alone, apart from large developments in Agra, Ghaziabad, Mohali, and other cities. According to the appellants, subjecting the entire company to insolvency for a default linked to specific projects would freeze viable developments and unfairly prejudice homebuyers who had already invested significant sums and were awaiting possession.

IL&FS opposed any restriction on the insolvency proceedings and argued that the loans were sanctioned for broader corporate purposes, including infrastructure development of the Mother City project. On this basis, it was contended that the insolvency process ought to extend to the entire corporate debtor and not be confined to a few projects.

The appellate tribunal did not accept the plea to quash the insolvency proceedings altogether, noting that the existence of debt and default was not in dispute. However, after examining the loan agreements and security documents, the NCLAT found that the securities and receivables were clearly identified and tied to specific projects. It held that where loan agreements specify particular securities, the CIRP must be confined to those projects alone.

In this context, the tribunal relied on the “reverse CIRP” approach evolved in real estate insolvency cases, which seeks to balance the interests of stakeholders by confining insolvency to the defaulting project while allowing other unrelated projects to continue. The Bench observed, “When the securities and receivables are specified in the Loan Agreement, we are of the view that the CIRP has to be confined to only those projects, which form part of the securities/receivables, and extending the CIRP to projects, which are not contemplated or referred to in the Loan Agreements, is uncalled for”

Accordingly, the NCLAT ruled that the insolvency process would apply only to Sushant Golf City in Lucknow and the Rajasthan projects — Ansal Royal Plaza, Orchid Plaza, and Tulip Plaza. All other projects of Ansal Properties in Agra, Ghaziabad, Mohali, and elsewhere were expressly kept outside the ambit of the CIRP, enabling construction activities and possession handovers in those projects to continue under the existing management.

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The tribunal also directed that the Lucknow Development Authority be impleaded in the insolvency proceedings and permitted it to place its position on record by filing an affidavit. With these directions, the appeals were partly allowed, modifying the NCLT’s order by limiting the scope of insolvency while affirming the initiation of CIRP in respect of the identified projects.

For Appellant: Advocates Neeha Nagpal, Malak Bhatt and Nikunj Mahajan; Senior Advocate Sanjiv Kumar Dubey with Advocates Abhishek Chawdhary, Shahrukh, and Tanya Verma for LDA & BKDA; Advocate Abhishek Chaudhary for GDA & ADA.

For Respondents: Senior Advocate Gopal Jain with Advocates Satendra Rai, Ruchika D. and Pareesh Virmani for R1 IL&FS; Advocates Abhishek Anand, Karan Kohli for RP; Senior Advocate Ashim Vachher with Advocates Saiba M. Rajpal and Vinayak Uniyal for I.A. 2251 & 3556 of 2025; Senior Advocate Arijit Prasad with Advocates Ankita Singh, Argh B. Sharma, Deepak Kumar and Priyanshi Sharma, for UP Awas; Advocates Karamveer and Kumar Abhishek for I.A. 2252 of 2025 Homebuyers; Advocate Thakur Ankit Singh, for IA No. 2555 and 2993 of 2025; Advocate Anshul Sharma for Homebuyers in I.A. 3001 of 2025; Senior Advocate Sunil Fernandes with Advocates Spandan Biswal, Kaustubh Rai and Shivendra Pandey for I.A. No. 4193 of 2025; Advocates A. K. Tewari, Rahul Burmani, and Yosha Dutt for I.A. No. 5887 & 5888 of 2025.

Cause Title: Gagan Tandon & Ors. v. IL & FS Financial Services Ltd. & Ors.

Case Number: Company Appeal (AT) (Ins.) Nos. 500 & 502 of 2025

Coram: Judicial Member Justice Ashok Bhushan and Technical Member Barun Mitra