Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi Bench, comprising Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra, has set aside the insolvency proceedings initiated against Mahagun (India) Pvt. Ltd., a leading Noida-based real estate company, and remanded the matter back to the National Company Law Tribunal (NCLT), New Delhi Bench, for fresh adjudication.

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The Appellate Tribunal observed that the Adjudicating Authority failed to consider that the alleged default pertained only to one project and not the company as a whole. It held that the NCLT should have examined whether the Corporate Insolvency Resolution Process (CIRP) should be confined to that specific project alone in accordance with the law laid down by the Supreme Court in similar cases.

Background

The appeal arose from an order dated August 30, 2025, passed by the NCLT admitting a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) filed by IDBI Trusteeship Services Ltd., the financial creditor, against Mahagun (India) Pvt. Ltd. The company had raised funds for its “Mahagun Manorialle” project by issuing secured, senior, unlisted, redeemable, transferable, non-convertible debentures (NCDs) worth up to ₹355 crore in December 2020. These were due for redemption between December 31, 2022, and December 31, 2025. When the company defaulted on repayment on September 30, 2023, the lender issued recall notices in February and April 2024. Subsequently, the insolvency petition was filed in January 2025, and the NCLT admitted it, initiating CIRP against the entire company.

Contentions

The Appellant–Mahagun (India) Pvt. Ltd. contended before the NCLAT that the default related only to one project—Mahagun Manorialle—and not its other ongoing real estate projects, which were independently financed and operationally solvent. It was argued that the NCLT had erred in initiating insolvency proceedings against the entire company without considering the principle of project-specific insolvency, as recognized by the Supreme Court in Mansi Brar Fernandes v. Indiabulls Asset Reconstruction Co. Ltd. The company also submitted that it was not given adequate opportunity to file a comprehensive reply and place relevant project details on record.

On the other hand, IDBI Trusteeship Services Ltd., the financial creditor, supported the NCLT order and argued that Mahagun had defaulted on its payment obligations under the NCDs. It contended that the default triggered the right to initiate CIRP under Section 7 of the IBC and that the NCLT rightly admitted the petition.

Homebuyers and other lenders of Mahagun’s various projects, however, intervened and urged that insolvency proceedings should be limited to the defaulting project, as extending CIRP to all projects would unjustly impact thousands of homebuyers and disrupt ongoing constructions where there was no default.

Tribunal’s Observations

The Appellate Tribunal took note that Mahagun had multiple projects financed by different lenders, and the NCLT had failed to distinguish the default limited to the Mahagun Manorialle project from the company’s other ventures. It observed that the NCLT’s order did not consider the project-wise financial structure or the Supreme Court’s rulings emphasizing project-based CIRP in cases involving large real estate developers.

Referring to the Supreme Court’s judgments in Mansi Brar Fernandes v. Indiabulls Asset Reconstruction Co. Ltd. and Indiabulls Asset Reconstruction Co. Ltd. v. M/s Supertech Ltd., the NCLAT reiterated that the Adjudicating Authority must examine whether insolvency proceedings should be restricted to the defaulting project or extended to the entire company. The Bench observed:“We are of the view that in light of the law laid down by the Hon’ble Supreme Court in Mansi Brar Fernandes and Indiabulls Asset Reconstruction Co. Ltd., the Adjudicating Authority has to consider whether the CIRP be confined to the project for which the Financial Creditor has advanced finance or continue encompassing all the projects of the Corporate Debtor.”   The Tribunal also recorded that Mahagun had expressed its willingness to file a detailed reply within one week and that other stakeholders, including lenders and homebuyers, sought liberty to intervene and present their case.

Final Directions

Accordingly, the NCLAT set aside the NCLT’s order admitting the insolvency petition and remitted the matter back to the Adjudicating Authority for fresh adjudication. The Bench granted Mahagun one week’s time to file its reply and permitted other parties to move intervention applications. The NCLAT clarified that no further extension of time would be granted and that it would be for the NCLT to decide the case on its merits, keeping in view the Supreme Court’s project-based insolvency principles.

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In conclusion, the NCLAT held that the NCLT’s order initiating CIRP against Mahagun (India) Pvt. Ltd. could not stand as it failed to consider the limited nature of the alleged default. The matter was remanded for fresh consideration, ensuring that only the defaulting project would be examined for insolvency, thereby protecting the interests of homebuyers and lenders of other solvent projects.

Appearance

For Appellant: Senior Advocate Abhijeet Sinha with Advocates Gaurav Mitra, Gaurav H. Sethi, Anmol Joshi, Rahul Kapoor and Rahul Panwar for Amit Jain; Advocate Ashim Sood, Varun Kalra and Ekansh Gupta for Aditya Birla Capital

For Respondents: Senior Advocate Krishnendu Dutta with Advocates Somdutta Bhattacharya, Kiran Sharma and Niharika Sharma for IDBI; Advocates Malak Bhatt, Neeha Nagpal, Saahil Bahety and Ms. Somya Saxena, Advocates for RP; Advocates Sumesh Dhawan, Aman Sharma and Shaurya, Advocates for Homebuyers; Advocates Gaurav Rana, Ajitesh Kumar, Shivanshu Srivastava also for IDBI Advocate Adhish Srivastava for IDBI in another IA; Advocates Sujoy Datta and Jasjeet Singh and Shubham Raghuwanshi for IDBI in another IA; Advocates Harsha Gollamudi, Varad Dwevedi, and Pratima Singh, Advocates for one of the intervenors; Senior Advocate Gopal Jain with Advocates Sanjeev Singh, Anish Gupta and Sandipa Bhattacharjee for Manorialle Social Welfare Society.

Cause Title: Amit Jain v IDBI Trusteeship

Case No: Company Appeal (AT) (Insolvency) No. 1186 of 2025

Coram: Chairperson Justice Ashok Bhushan, Technical Member Barun Mitra