Weekly Review: Key Decisions Made on IBC by NCLAT Spanning April 16 to April 30, 2025
Between April 16 and April 30, 2025, the National Company Law Appellate Tribunal (NCLAT) handed down several significant orders under the Insolvency and Bankruptcy Code, 2016. These decisions shed light on various aspects of the Code and underscore the tribunal's commitment to clarifying procedural matters.
In the case of *Deepak Mahadev Shirke v. Unity Small Finance Bank Limited*, the NCLAT held that for an arbitral award to give rise to a fresh cause of action and reset the limitation period for filing an application under Section 7 of the IBC, the date of default in Part IV of Form-1 of the application must be formally amended to reflect the award date as the basis for default. The Adjudicating Authority does not have the authority to *suo moto* revise this date based solely on oral submissions.
In another notable case, Bank of Baroda v. Formation Textile LLC, the NCLAT clarified that the Adjudicating Authority cannot award unliquidated damages under Section 60(5)(c) of the Code for breach of the resolution plan and may only direct payment as contemplated in the process memorandum.
The NCLAT also ruled in Sadananda Maiya P v. Karnataka Bank Limited that the personal guarantor cannot file an appeal under Section 61 of the Code against the decision to appoint a resolution professional.
In Fabtech Projects and Engineers Private Limited v. Hindustan Petroleum Corporation Limited, the NCLAT held that liquidated damages already deducted from invoices during the Corporate Insolvency Resolution Process (CIRP) period cannot be refunded to a successful resolution applicant post the approval of a plan. The performance bank guarantee provided by the successful resolution applicant, on the other hand, does not form part of the equity infusion and should continue until full implementation of the resolution plan.
In Gajjala Yoganand v. Manjeera Retail Holdings Private Limited, the NCLAT held that condonation of delay should be such that could stand the test of genuineness, and the reasonableness of the delay is required to be tested based on grounds taken for the purpose of seeking condonation.
The NCLAT also clarified in Shitanshu Bipin Vora v. Shree Hari Yarns Private Limited that interest cannot form part of operational debt under the Code unless there is an explicit agreement between the parties.
The tribunal affirmed that the conversion of a partnership firm into a company does not extinguish or absolve the corporate debtor of its pre-existing liabilities. In Brihanmumbai Electric Supply And Transport Undertaking v. Ashok Kumar Golecha, the NCLAT observed that even if the requirement of registration of charge under Section 77(3) of the Companies Act is sidestepped, the need to possess documents of charge creating the security interest cannot be waived.
In Manjeera Majestic Commercial Owners Association v. Manjeera Retail Holdings Private Limited, the NCLAT held that unregistered agreements for sale cannot create validly conferred rights over immovable property in CIRP proceedings.
The NCLAT also stated in Shailendra Agarwal v. Asit Upadhyaya that the continued failure of the corporate debtor to hand over possession or refund the amount to homebuyers constitutes a continuing default under Section 22 of the Limitation Act, 1963.
In Star Maxx Properties v. Arunava Sikhdar, the NCLAT held that an arbitral award restraining a corporate debtor from allotting, alienating or dealing with disputed properties does not create a security interest within the meaning of the Code.
The NCLAT in Fabtech Projects and Engineers Private Limited v. Hindustan Petroleum Corporation Limited also clarified that the extinguishment of claims pursuant to a resolution plan affects only outstanding claims, not amounts that were already adjusted during the performance of the contract.
In Catalyst Trusteeship Limited v. Ecstasy Realty Private Limited, the NCLAT held that the Code cannot be misused as a coercive tool for debt recovery when the true intent is not corporate resolution but to financially cripple a solvent debtor and facilitate asset takeover.
In Brihanmumbai Electric Supply And Transport Undertaking v. Ashok Kumar Golecha, the NCLAT stated that the liquidator is not expected to interpret contractual provisions beyond a plain reading and rejected the concept of a floating charge without proper charge documentation.
The NCLAT in IDBI Bank Limited v. Mathstraman Manufacturers and Traders held that the liquidator cannot undertake a re-survey of a property where the survey report was already available.
In Rajesh Bhatia v. Canara Bank, the NCLAT held that a personal guarantor has no locus standi to challenge the appointment of a resolution professional under Section 97 of the Code.
The NCLAT held that allottees who have obtained recovery certificates or decrees under the Real Estate Regulatory Authority continue to be financial creditors until possession is handed over or the refund is completed.
Lastly, in IDBI Bank Limited v. KRS Erectors Private Limited, the NCLAT held that an interlocutory application seeking an injunction against a non-party to the ongoing proceeding is not maintainable.
These decisions highlight the NCLAT's continued focus on clarifying procedural aspects of the IBC during the period from April 16 to April 30, 2025. For a comprehensive list, it would be necessary to consult the specific NCLAT Fortnightly report for this period.
In the context of finance and business, the NCLAT in Deepak Mahadev Shirke v. Unity Small Finance Bank Limited case emphasized that the date of default in Part IV of Form-1 of an application under Section 7 of the IBC must be formally amended to reflect the award date, as the Adjudicating Authority does not have the authority to revise this date solely on oral submissions.
In relation to business operations, the NCLAT in Bank of Baroda v. Formation Textile LLC clarified that the Adjudicating Authority cannot award unliquidated damages for breach of the resolution plan under Section 60(5)(c) of the Code, and may only direct payment as contemplated in the process memorandum.
