NCLAT Upholds NCLT's Decision to Recall Insolvency Petition in Expert Realty Case

NCLAT Upholds NCLT's Decision to Recall Insolvency Petition in Expert Realty Case

Introduction

The National Company Law Appellate Tribunal (NCLAT) has ruled that National Company Law Tribunals (NCLTs) can recall an admitted insolvency petition if the process is shown to be fraudulent or malicious under Section 65 of the Insolvency and Bankruptcy Code (IBC). This decision was made in the case of Expert Realty Professionals Private Limited Vs Logix Infrastructure Private Limited.

Factual Background

Logix Infrastructure, a Noida-based developer, launched the Blossom County project with 17 towers and 2,384 units. In October 2020, it entered into a buy-back arrangement with Expert Realty for 1,37,918 sq. ft. of built-up area. Expert Realty infused ₹15 crore, and minutes of a December 2021 meeting recorded a liability of ₹12.88 crore owed by Logix. When the amount was not paid, Expert Realty filed a Section 7 petition, which was admitted in July 2023.

Procedural Background

The NCLT appointed an Interim Resolution Professional and commenced the corporate insolvency resolution process (CIRP). However, homebuyers later challenged the proceedings under Section 65 of the IBC, alleging that the petition was collusive and intended to shield the company from its obligations towards Noida Authority and allottees. The NCLT recalled the admission, calling the process fraudulent and mala fide, and imposed a penalty of ₹55 lakh on Expert Realty.

Issues

• The main issue was whether the NCLT's decision to recall the insolvency petition was valid.
• The NCLAT had to determine whether the process was indeed fraudulent or malicious, warranting the recall of the admission order.

Contentions of the Parties

Expert Realty: Expert Realty argued that the NCLT's decision was incorrect, and the insolvency petition was valid.

Homebuyers: The homebuyers contended that the petition was collusive and intended to shield the company from its obligations.

Reasoning and Analysis

The NCLAT upheld the NCLT's finding, noting that documents relied on by Expert Realty were unstamped, unregistered, and lacked safeguards. The NCLAT also found that Logix's director Hemant Sharma had been an Additional Director at Expert Realty, and along with its director Neeraj Gusain, was a partner in the same LLP. This suggested collusion and fraudulent intent.According to the order delivered on 8th September, 2025, a Bench of Justice N Seshasayee (Judicial Member) and Arun Baroka (Technical Member) said that, “We note that if there is fraud it will vitiate everything including order approving the resolution plan. Thus, the stage of CIRP is inconsequential, while considering the Section 65 application."

Implications

The NCLAT's decision implies that NCLTs have the authority to recall insolvency petitions if they are found to be fraudulent or malicious. This ruling emphasizes the importance of genuine transactions and the need to prevent abuse of the IBC process.

Relief Sought

Expert Realty sought to set aside the NCLT's order recalling the admission of the insolvency petition. However, the NCLAT dismissed the appeal, holding that the recall was a valid exercise of jurisdiction under Section 65 of the IBC.

In this case the appellant was represented by Mr. Sunil Fennandes, Sr. Advocate with Mr. Ketan Madan and Ms. Muskan Surana, Advocates. Meanwhile the respondent Mr. Gaurav Rana and Mr. Ajitesh Kumar, Advocates for R-2 & 3 along with Mr. Rishi Singhal, Mr. Pawan Kr. Goyal and Ms. Reena, Advocates for RP/R-1.