NCLAT Allows IDBI Trusteeship to Initiate CIRP as there is Valid Authorization from Assignee of Debt [Read Order]

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has allowed IDBI Trusteeship to initiate Corporate Insolvency Resolution Process (“CIRP”) as there is a valid authorization from the assignee of the Debt.

The Appeal has been filed by the Suspended Director of the Corporate Debtor (“CD”) - Advantage Raheja Hotels Private Limited challenging the order dated 17.12.2024 passed by National Company Law Tribunal, Mumbai Bench, Court-II admitting Section 7 application filed by IDBI Trusteeship Services Limited (“IDBI Trusteeship”). By order dated 17.12.2024, Corporate Insolvency Resolution Process (“CIRP”) has been commenced against the CD and Shri Jayesh Natvarlal Sanghrajka has been appointed as IRP. Aggrieved by which order, this Appeal has been

filed.

On 26.12.2017, Piramal Capital and Housing Finance Ltd. (“PCHFL”) entered into a Loan Agreement with Gstaad Hotels (“Gstaad Hotels”) Private Limited and Neo Capricorn Plaza Private Limited (“Neo Capricorn”) as Borrowers. On 26.12.2017 a Security Trustee Agreement was entered between Gstaad Hotels, Neo Capricorn, PCHFL and the Financial Creditor (IDBI Trusteeship). On 26.12.2017 a Deed of Guarantee (“Corporate Guarantee”) was executed by the CD – Advantage Raheja Hotels Pvt. Ltd. in favour of Financial Creditor, guaranteeing the repayment of the loan. There have been further facilities extended to the Borrowers under ECLGS-1 and ECLGS-2 Facility.

By Deed of Assignment on 27.12.2022, all rights of Lenders were assigned to M/s Omkara Assets Reconstruction Private Limited (“Omkara”). On default being committed by Gstaad Hotels and Neo Capricorn, Omkara issued a legal notice dated 15.02.2023 and initiated proceedings under Section 7 by filing CP(IB) Nos.290 and 291 of 2023 against the Principal Borrowers.

The Adjudicating Authority admitted Section 7 application against the Corporate Guarantor. The Adjudicating Authority also in the impugned order noticed that by order dated 09.01.2024, both the Principal Borrowers have already been admitted into CIRP. Challenging the order dated 17.12.2024 this Appeal has been filed.

The Appellant submitted that by the impugned order, the Adjudicating Authority has admitted Section 7 application against the Corporate Guarantor. It is submitted that against the admission of Section 7 application of the principal borrower, Appeals were filed in this Tribunal being Company Appeal (AT) (Insolvency) Nos. 165 of 2024 and 212 of 2024 which both Appeals were allowed by judgment of this Tribunal dated 08.01.2025.

It is submitted that the Adjudicating Authority in the impugned order has relied on the admission of the Section 7 application against the principal borrower which admission order having been set aside the impugned order cannot be sustained. Counsel for the Appellant submitted that the CoC has already been constituted in pursuance of the impugned order.

During hearing of this Appeal, Counsel for the Respondent submitted that Section 7 application, which remanded back to the Adjudicating Authority for fresh consideration by this Tribunal by order dated 08.01.2025, were considered and admitted by the Adjudicating Authority vide order dated 08.07.2025. Challenging the said order, Company Appeal (AT) (Ins.) Nos.1039 and 1040 of 2025 were filed in this Tribunal, which have now been dismissed by this Tribunal vide its order dated 19.08.2025.

The CIRP against Principal Borrower having been admitted, which has also been confirmed by this Tribunal, no error can be found against the admission of CIRP against the Corporate Guarantor by the Adjudicating Authority vide order dated 17.12.2024. It is submitted by learned Counsel for the Respondent that in view of order of admission against Principal Borrower having been made final, this Appeal deserves to be dismissed.

Counsel for the Appellant in support of the Appeal raised only one submission. The submission is that IDBI Trusteeship was not authorized to file Section 7 application against the CD. It is submitted that any instruction given by Piramal Capital and Housing Finance Ltd, the original Lender is meaningless, there being no authorisation in favour of IDBI Trusteeship to initiate Section 7 application against the CD, the entire proceedings is unauthorized and liable to be rejected on this ground alone.

Thus, Omkara Assets Reconstruction Pvt. Ltd. has given written instructions to the Financial Creditor to issue Recall and Personal Guarantee Invocation Notice at the earliest and also the subsequent email dated 23.03.2023.

Section 7 application, was initiated on the basis of entitlement of the IDBI Trusteeship through the Trusteeship Agreement as well as specific written aurhorisation by the Omkara subsequent to assignment in its favour. Coming to the citations relied by the Appellant in support of his submission that there is no locus to file application under Section 7 without valid authorisation, suffice it to say that present is a case where valid authorisation has been both pleaded and proved.

The New Delhi bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical) held that authorisation has been pleaded and proved,thus, do not find any error in the order admitting Section 7 application against the Corporate Guarantors.

Initiation of the CIRP against the Principal Borrowers has already been affirmed by the Tribunal by dismissing the Appeal(s) filed by the Suspended. No infirmity can be found in initiation of CIRP against the Corporate Guarantors and dismissed the Appeal.

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