NCLAT set aside insolvency proceedings against Mahagun, asks NCLT to hear again

New Delhi: In a major relief to realty firm Mahagun, the National Company Law Appellate Tribunal (NCLAT) has set aside insolvency proceedings against it and directed the NCLT to hear the petition afresh, considering the fresh status report filed before it over the projects.

A two-member bench of the appellate tribunal said the NCLT should have taken into consideration the directions issued by the Supreme Court in the Mansi Brar Fernandes case, where it was held that real-estate insolvency should be project-specific.

Moreover, the NCLAT also noticed an intervention application filed by different sets of homebuyers of other projects of Mahagun, where they prayed to set aside the NCLT order directing insolvency against the realty firm.

Some of them also suggested continuing the Corporate Insolvency Resolution Process (CIRP) against Mahagun, and a set of group members argued that it should be confined to only the project Mahagun Manorialle.

In this matter, Aditya Birla Capital Ltd (ABCL) also filed an intervention stating that it has advanced finance to Mahagun for four other projects, which are operational, and no default has been committed.

The Delhi-based bench of the National Company Law Tribunal (NCLT), on August 5, 2025, allowed the insolvency plea filed by IDBI Trusteeship Services Ltd against Mahagun over a default of Rs 256.48 crore on redemption of debentures by the realty firm.

This was challenged by a member of the suspended board of Mahagun before the appellate tribunal.

Considering the submissions, the NCLAT said: "Order, dated August 5, 2025, is set aside and petition IB112(ND)/2025 revived before the Adjudicating Authority for fresh consideration".

The NCLAT also granted Mahagun India one week’s time to file a detailed reply to the insolvency plea filed under Section 7 of IBC, with a status report filed before it.

"Both parties are given liberty to place this order before the Adjudicating Authority (NCLT) and request for fixing a date in the Section 7 petition, after two weeks, for hearing and consideration. No further opportunity be granted to the CD to file a reply," said the 39-page-long NCLAT order passed on Thursday.

The NCLAT bench, comprising Chairperson Justice Ashok Bhushan and Barun Mitra, Member (Technical), also granted liberty to Aditya Birla Capital Ltd to file a fresh intervention application in the Section 7 petition, which needs to be considered and decided by the adjudicating authority in accordance with law".

Aditya Birla Capital is the financial creditor of four real estate and commercial projects across Delhi and NCR, namely Mahagun Metro Mall, Hotel Sarovar Portico, Mahagun Montage and Hotel Park Plaza, which are exclusively mortgaged to it by the realty firm.

The NCLAT also granted similar relief to home buyers by granting liberty to them, who have filed IAs in these appeals, to file an intervention application before the NCLT, which can also be considered by them in accordance with law.

The appellate tribunal also clarified that it has "not expressed any opinion on the merits of the Section 7 petition and the intervention applications", and said "it is for the Adjudicating Authority to consider and decide".

Mahagun had committed default on redemption of Debentures on September 30, 2023. The IDBI Trusteeship Services issued a recall/ default notice on February 20, 2024, and on April 17, 2024. It later approached the NCLT, claiming a default of Rs 256.48 crore, praying for the initiation of CIRP.

The realty firm had challenged maintainability on the IDBI Trusteeship plea and sought time for filing a detailed reply. The NCLT did not accept the request and, by order, passed on the same date, after granting liberty to the parties to file written submissions, restricting the arguments reserved in the order.

On August 4, 2025, Mahagun filed an application for the postponement of judgment. In the application, it was pleaded that there are other projects of the realty firm CD having more than 6,000 homebuyers.

It was also stated that in the event of a two-week postponement allowed to Mahagun, it will complete the settlement process and avoid the need for judgment in the company petition.

However, the NCLT passed an order admitting an insolvency plea against Mahagun and appointed an Interim Resolution Professional, suspending the board of the company.

The NCLT held that Mahagun has not denied the debt and default, and there is a record of the information utility that the default is mentioned. It held that there is an admitted default; therefore, the petition is to be admitted.

This said order was challenged by Amit Jain, Director of the suspended board of Mahagun (India), before the NCLAT, which set aside the order.