No Requirement For Impleading Third Parties In Section 7 Proceedings: NCLT

No Requirement For Impleading Third Parties In Section 7 Proceedings: NCLT

Introduction

The National Company Law Tribunal (NCLT) Bengaluru presided by Hon'ble Member (Judicial) Sh. Sunil Kumar Aggarwal and Hon'ble Member (Technical) Sh. Radhakrishna Sreepada delivered a significant judgment on May 1, 2025, in the matter of Cerebra Integrated Technologies Ltd. vs. Manish Kumar Bhardwaj.

Factual Background

The Financial Creditor, Manish Kumar Bhardwaj who is the Proprietor of Bhardwaj Enterprises filed a Section 7 petition against the Corporate Debtor, Cerebra Integrated Technologies Ltd., alleging a payment default of Rs.1,73,94,992. The Corporate Debtor sought to implead Sunstar Realty Development Private Limited and Mr. Sunil Bhandari as respondents, claiming they are necessary parties to determine the true facts. However, the financial creditor claimed that it is a settled law that no person who is not a party to the main petition can claim a right to be heard in a pre-admission stage of a petition under Section 7 of the IBC, 2016.

Procedural Background

The Corporate Debtor filed an application for impleadment, which was opposed by the Financial Creditor. The Financial Creditor argued that only the Corporate Debtor and Financial Creditor are necessary parties in Section 7 proceedings.

Issues Involved

1. Necessary Parties: Whether Sunstar Realty Development Private Limited and Mr. Sunil Bhandari are necessary parties in the Section 7 proceedings.

2. Impleadment: Whether the Corporate Debtor's application for impleadment should be allowed.

Contentions of the Parties

Corporate Debtor's Contentions: The Corporate Debtor argued that impleadment is necessary to determine the existence of a valid financial debt and to clarify disputed questions of fact.

Financial Creditor's Contentions: The Financial Creditor contended that only the Corporate Debtor and Financial Creditor are necessary parties in Section 7 proceedings and that impleading other parties would convert the proceedings into civil suit proceedings.

Reasoning and Analysis

The NCLT, comprising Hon'ble Member (Judicial) Sh. Sunil Kumar Aggarwal and Hon'ble Member (Technical) Sh. Radhakrishna Sreepada, held that in an application under Section 7, only the Financial Creditor and Corporate Debtor are necessary parties. The tribunal relied on various judgments to support this proposition and noted that impleading other parties at the pre-admission stage is not required.

Final Decision

The NCLT dismissed the application for impleadment, concluding that the Corporate Debtor's request to add Sunstar Realty Development Private Limited and Mr. Sunil Bhandari as respondents is not warranted in Section 7 proceedings.

Law Settled

This judgment reinforces the principle that in Section 7 applications, the focus is on determining the existence of a financial debt and default, and only the Financial Creditor and Corporate Debtor are necessary parties.

In this case the corporate debtor, Cerebra lntegrated Technologies Limited was represented by Sri Afnaan Siddique, Advocate. Meanwhile the financial creditor was represented by Ms. Parina Lalla, Advocate.