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Indiabulls Asset Reconstruction Company Limited vs. Ram Kishore Arora & Ors.

Civil Appeal · 2023 INSC 523Decided 11 May 2023
Civil Appeal No. 1925 of 2023
Dinesh Maheshwari · Sanjay Kumar

Background

Supertech Ltd., a real estate company building several projects (mainly in the NCR), defaulted on loans from Union Bank of India, leading to insolvency proceedings under Section 7 of the IBC. The NCLT admitted the insolvency application and appointed an Interim Resolution Professional (IRP), but the NCLAT (on the promoter's appeal) modified this into an unusual "project-wise" arrangement, restricting the Committee of Creditors (CoC) to just one project ("Eco Village-II"), while letting the ex-management continue running the company's other ongoing projects with IRP oversight. Two financial creditors (Union Bank of India and Indiabulls Asset Reconstruction Company) challenged this project-wise resolution approach before the Supreme Court, arguing the IBC has no concept of "project-wise" insolvency and that the NCLAT had no power to sideline the CoC or let ex-management back in without following due process. A related appeal by Assets and Care Reconstruction Ltd. (Civil Appeal No. 1975 of 2023) concerned similar interim NCLAT directions on convening lender meetings.

Decision Breakdown

The Supreme Court, considering only the question of interim relief pending final disposal of the appeals, applied settled principles on interlocutory injunctions: that the party seeking a change must show a strong case, risk of irreparable injury, and that the balance of convenience favours the change (relying on Union of India v. Raj Grow Impex LLP and the "lower risk of injustice" test from English case law). The Court found that displacing the NCLAT's interim arrangement and forcing a company-wide CoC at this stage would throw all the ongoing (non-Eco Village-II) projects into uncertainty and cause serious hardship to home buyers, whereas keeping the status quo (other projects continuing under IRP supervision with ex-management assistance, without creating new rights for the ex-management) caused comparatively less harm. It therefore declined to disturb the NCLAT's interim directions for projects other than Eco Village-II, and for Eco Village-II (where a CoC had already been ordered) directed that no step beyond voting on a resolution plan proceed without the Supreme Court's specific permission. The larger legal question of whether "project-wise" CIRP is even permissible under the IBC was left open for final hearing, listed for admission in July 2023; no interim relief was granted in the connected Assets and Care Reconstruction appeal.

Lesson Learnt

Courts granting or refusing interim relief weigh which course carries the lower risk of injustice and greater practical hardship (here, protecting home buyers in ongoing projects) rather than resolving the underlying legal controversy at the interim stage: a reminder that an interim order is not a final ruling on the merits of a novel legal question like "project-wise insolvency resolution."

Official source (sci.gov.in)View Judgment (PDF)

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