Full Judgment Text
Reportable
2026 INSC 186
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 7424 OF 2025
CATALYST TRUSTEESHIP LTD. … Appellant
versus
ECSTASY REALTY PVT. LTD. … Respondent
J U D G M E N T
SANJAY KUMAR, J
Refusal to initiate corporate insolvency resolution process under
1.
1
Section 7 of the Insolvency and Bankruptcy Code, 2016 , against Ecstasy
Realty Pvt. Ltd., the respondent, is in issue. CP (IB) 922/MB/C-I/2022 filed
in that regard by Catalyst Trusteeship Ltd. (hereinafter, referred to as ‘the
debenture trustee’) was dismissed by the National Company Law
Tribunal, Mumbai Bench-I (‘NCLT’), vide order dated 03.02.2023. The
same stood confirmed in appeal by the National Company Law Appellate
Tribunal, Principal Bench, New Delhi (‘NCLAT’), vide judgment dated
16.04.2025 passed in the debenture trustee’s Company Appeal (AT)
(Insolvency) No. 467 of 2023. Aggrieved thereby, the debenture trustee is
in appeal before this Court under Section 62 of the Code.
Signature Not Verified
Digitally signed by
SACHIN KUMAR
SRIVASTAVA
Date: 2026.02.24
17:44:37 IST
Reason:
1
For short, ‘the Code’
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2. The respondent company proposed to erect a residential-cum-retail
project in Mumbai and to meet its requirement of funds in that regard, it
proposed to issue 850 redeemable non-convertible debentures of the
value of ₹850 crore in two series, viz., Series A and Series B. The
resolution in this regard was passed by the Board of Directors of the
respondent company on 20.03.2018. On the same day, the debenture
trustee was appointed on behalf of the debenture holders. A Debenture
Trust Deed (DTD) was executed between the debenture trustee, the
respondent company and Shobhit J. Rajan, the mortgage provider, on
27.03.2018. Series A debentures to the tune of ₹600 crore were fully
subscribed by the debenture holders and the entire amount was disbursed
to the respondent company on 28/29.03.2018. ECL Finance Limited
(ECLF), Edelweiss Finvest Pvt. Ltd., Barbelo Estates LLP, an entity of the
Edelweiss group, and other directors/associates held these debentures.
Series B debentures, amounting to ₹250 crore, never came to be issued.
While so, on 16.03.2022, the respondent company addressed an
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e-mail to ECLF proposing the restructuring of the loan repayment under
the debentures, requesting for principal and interest moratorium of 18
months in respect of the balance debentures apart from other relaxations,
including release of the Bandra property, mortgaged by its sister concern,
Variegate Real Estate Pvt. Ltd., and release of ₹25 crore, so as to continue
with the documentation process for the Sapphire (Blackrock) transaction.
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On 23.03.2022, ECLF informed the respondent company that, subject to
completion of the Sapphire transaction by 25.03.2022, it was agreeable to
providing restructuring along with principal and interest moratorium of 18
months for the balance debentures and for release of the Bandra property
from the security package. On 29.03.2022, by way of an e-mail, the
respondent company assured ECLF about completion of the Sapphire
transaction and sought confirmation of the restructuring proposal. It also
stated that it was awaiting a NOC from the debenture trustee and that the
same was required urgently. On 30.03.2022, ECLF replied by e-mail,
informing the respondent company that it was agreeable to provide
extension but would need to run the entire process internally based on the
overall resolution plan and the final restructuring approval would be
provided around the month of June, 2022. Reference was also made to
issuance of a NOC by the debenture trustee and the respondent company
was informed that if it had any issues with the date of the said certificate,
it could reach out to the debenture trustee, which would do the needful.
In this regard, we may note that the respondent company addressed
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letter dated 23.03.2022 to the debenture trustee seeking its NOC to avail
funding from India Credit Investment Fund to the tune of ₹152 crore,
through non-convertible debentures, against a charge on 18 unsold flats
in Phase I of the project along with the receivables of sold flats,
aggregating to ₹4.42 crore, and requested for issuance of a NOC and for
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release of the charge on the 18 unsold flats and receivables of ₹4.42 crore
at the earliest. Notably, there was no mention of the restructuring proposal
under discussion between the respondent company and ECLF in this
letter. In turn, the debenture trustee addressed letter dated 28.03.2022 to
the respondent company, wherein it stated that it had no objection to the
issuance of non-convertible debentures of ₹152 crore by the respondent
company and creation of a charge over the 18 unsold flats and the
receivables of ₹4.42 crore. It was further stated that upon receipt of ₹152
crore from the respondent company in the escrow account, the debenture
trustee would immediately release the charge over the said property.
Significantly, there was no mention in this letter also of the restructuring
proposal or of the debenture trustee even being aware of it. On the other
hand, on 28.04.2022, the debenture trustee addressed a demand letter to
the respondent company, stating that ₹65,49,72,125/- was overdue on the
debentures as on 15.04.2022 and asking for payment.
It appears that it was only thereafter that the debenture trustee was
5.
brought into the picture apropos the restructuring proposal. Pertinently,
none of the earlier e-mails exchanged between ECLF and the respondent
company were marked to or shared with the debenture trustee. By its
letter dated 29.04.2022 addressed to the respondent company, the
debenture trustee stated that, with reference to the respondent company’s
e-mail dated 29.03.2022 sent to one of the majority debenture holders in
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relation to restructuring of the debentures and their response e-mail dated
30.03.2022, the said e-mails had been forwarded to it for its record and
necessary action and, acting as the trustee for the benefit of the debenture
holders, the debenture trustee requested the respondent company to
provide the information/data and documents enumerated therein so that
the same could be placed before the debenture holders for their internal
processing and approval. The debenture trustee further stated that, till the
restructuring was formally approved by the debenture holders, any
payment shortfall would be an event of default. The debenture trustee
followed up with letter dated 17.05.2022, referring to its earlier letter dated
28.04.2022 and calling upon the respondent company to pay the overdue
amount of ₹65,49,72,125/- at the earliest.
6. By its reply dated 19.05.2022, the respondent company stated that
it had provided all data to ‘Edelweiss’ and advised the debenture trustee
to collect the data from it. Having stated so, it offered to send the
documents, without prejudice. It referred to its correspondence with
‘Edelweiss’ and claimed that no payment was due from it till September,
2023. The debenture trustee thereupon informed the debenture holders
on 06/08.06.2022 about the respondent company’s restructuring proposal
and sought their approval. Thereafter, on 10.06.2022, the debenture
trustee informed the respondent company that the restructuring proposal
had been rejected by 94.84% of the debenture holders.
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7. On 21.07.2022, the debenture trustee issued a loan recall notice,
requiring the respondent company to pay the entire dues with interest
thereon, amounting to ₹1203,55,50,671.11. The respondent company, in
turn, issued a reply though its lawyers on 29.06.2022, stating that it was
filing a commercial suit along with an interim application. The debenture
trustee filed an application under Section 7 of the Code on 25.08.2022
seeking initiation of insolvency process against the respondent company.
The said application came to be dismissed by the NCLT on 03.02.2023.
The same stood confirmed by the NCLAT on 16.04.2025, leading to the
filing of the present appeal.
8. Perusal of the order passed by the NCLT reflects that the NCLT
proceeded on the premise that a moratorium was already in place
pursuant to the negotiations between the respondent company and one
of the debenture holders. Observing that insolvency proceedings were not
in the nature of recovery proceedings, the NCLT dismissed the company
petition. In appeal before the NCLAT, it was specifically contended on
behalf of the debenture trustee that, in terms of clause 4.4 of the DTD, the
respondent company was required to maintain an interest payment
reserve account in escrow with the bank and was liable to pay interest to
the debenture holders, compounded quarterly. As the respondent
company had failed to do so, the debenture trustee issued recall notice
dated 21.07.2022 to the respondent company, demanding repayment of
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the principal amount along with interest, amounting to ₹1,203.55 crore. It
was pointed out that the understanding of the NCLT that a moratorium
was in place was erroneous as the argument in that regard was based on
the discussions held by the respondent company with only one of the
debenture holders and there was no modification of the DTD in
accordance with the procedure prescribed therein. It was pointed out that
the said debenture holder, ECLF, could not have acted on behalf of the
other debenture holders.
9. However, the NCLAT paced reliance on the letter dated 28.03.2022
addressed by the debenture trustee to the respondent company and held
against it, by inferring therefrom that it was aware of the restructuring
proposal. However, we do not find it to be so, as already indicated
hereinabove. The debenture trustee had only stated therein that it had no
objection to the respondent company availing further funding by issuing
non-convertible debentures and assured that, upon receipt of ₹152 crore
from the respondent company in the escrow account, it would immediately
release the charge over 18 unsold flats and the receivables of ₹4.42 crore.
This letter was with regard to the release of that property to enable the
respondent company to avail further funding and had nothing to do with
its restructuring proposal. Absence of any mention in this letter of the
restructuring proposal put forth by the respondent company to ECLF
speaks for itself. The letter was in aid of the respondent company keeping
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itself safe from being branded a non-performing asset, as it was already
in default, and nothing more.
10. As regards the release of a sum of ₹9.33 crore to the respondent
company by the debenture trustee, which was another factor that had
weighed with the NCLT, the specific contention of the debenture trustee
was that this amount had been released towards project expenses upon
instructions from the debenture holders, following the request received
from the respondent company. The debenture trustee, therefore, asserted
that this was not a fresh disbursal and could not be looked upon as integral
to the so-called restructuring proposal. We may note that it was the
specific case of the debenture trustee that ₹5 crore was disbursed from
the Sapphire transaction escrow account while ₹4.33 crore was released
from the DTD escrow, perhaps towards the receivables for the sold flats.
Both these transactions were clearly independent and had no nexus with
the restructuring proposal, which contemplated the release of ₹25 crore
and not a lesser sum.
In effect, the findings of the NCLAT were that the debenture trustee
11.
was aware of the restructuring of the loan by the respondent company and
ECLF; the debenture trustee and the debenture holders, by their conduct,
agreed to implement such restructuring, whereby an 18 months
moratorium became operative and subsisted till September, 2023, thereby
negating the default claim of the debenture trustee; and lastly, the
8
debenture trustee and the debenture holders deliberately engineered a
default so as to coerce the respondent company.
12. In this regard, we may note the settled legal position that for
admission of an application under Section 7 of the Code, the adjudicating
authority is only required to examine and satisfy itself that a financial debt
exists and there is default in relation thereto. In this context, the
observations of this Court in
Innoventive Industries Limited vs. ICICI
2
Bank and another are of relevance and are extracted hereunder:
On the other hand, as we have seen, in the case of a corporate
‘30.
debtor who commits a default of a financial debt, the adjudicating
authority has merely to see the records of the information utility or other
evidence produced by the financial creditor to satisfy itself that a default
has occurred. It is of no matter that the debt is disputed so long as the
debt is “due” i.e. payable unless interdicted by some law or has not yet
become due in the sense that it is payable at some future date. It is only
when this is proved to the satisfaction of the adjudicating authority that
the adjudicating authority may reject an application and not otherwise.’
Thus, the concept of a pre-existing dispute, which may be a
stumbling block for admission of an application filed under Section 9 of
the Code by an operational creditor, has no bearing on an application filed
by a financial creditor under Section 7 of the Code.
Significantly, the record reflects that correspondence by the
13.
respondent company with regard to restructuring of the loan facility under
2
(2018) 1 SCC 407
9
the debentures was with one Saahil Dugar, who was associated with
Edelweiss Alternative Asset Advisors Limited, an Edelweiss group
company. The case of the respondent company, as is evident from its
counter affidavit filed before us, was that he was acting on behalf of the
Edelweiss group/ECLF. No authorization in that regard was produced.
Thus, the restructuring proposal was addressed by the respondent
company to only one debenture holder, viz., ECLF. In the absence of
express authorization of Saahil Dugar to act on behalf of the other
debenture holders, which include a company, an LLP and individuals, his
actions could not bind them. Though the respondent company claims that
ECLF acted for the Edelweiss group, the fact remains that the other group
company and the LLP, legal entities in their own right, held debentures
separately. Therefore, the mere assertion that ECLF acted on behalf of
the others has no merit in the absence of express authorization being
given by them to do so. The bald statement by the respondent company
that the subsidiaries had no independent volition of their own, therefore,
cannot be accepted. Thus, they can neither be alleged to have committed
a volte face nor can they be said to have approbated and reprobated by
their conduct. Further, the other debenture holders and the debenture
trustee were never taken into confidence at that stage.
14. In this regard, the terms of the DTD assume significance. Clause 33
of the DTD is titled ‘Modifications to these presents’. As per clause 33.1,
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the terms of the DTD could not be amended without the prior written
consent of the debenture trustee and the debenture holders, through
‘approved instructions’. The phrase ‘approved instructions’ is defined in
clause 1.1 of the DTD to mean the instructions of the debenture holders
to the debenture trustee, which have been approved pursuant to the
provisions set out in Schedule 2, titled ‘Provisions for the Meetings of the
Debenture Holders’. Clause 22 in Schedule 2 provides that a meeting of
the debenture holders shall, inter alia , have the power, amongst others, to
sanction any compromise or arrangement proposed to be made between
the respondent company and the debenture holders. Clause 23 therein
specifically provides that the power set out in clause 22 shall be
exercisable by a resolution passed at a meeting of the debenture holders
duly convened and held in accordance with the provisions therein
contained and carried by a majority of not less than three-fourths of the
persons voting thereat upon a show of hands or if a poll is demanded by
a majority, representing not less than three-fourths in value of the votes
cast, on such poll and such a resolution is called a ‘Special Resolution’.
15. Clause 33.2 of the DTD states that the debenture trustee shall,
before taking any action on behalf of the debenture holders or providing
any consent on their behalf under any debenture document, obtain the
consent of the debenture holders as per the terms of the DTD. Clause
33.3 provides that upon obtaining such approval, the debenture trustee
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and the respondent company shall give effect to the same by executing
all necessary deed(s). Clause 33.4 is of crucial importance and states that
no amendment, modification or termination of any provision of the DTD or
debenture documents shall be effective unless the same is in writing and
signed by or on behalf of each of the parties. Clause 37 of the DTD is titled
‘Waiver’. Clause 37.1 posits that there can be no implied waiver or
impairment while clause 37.2, titled ‘Express Waiver’, states that a waiver
or consent granted by the debenture trustee under the DTD would be
effective only if given in writing.
16. Notably, the respondent company filed Commercial Suit No. 200 of
2022, as stated in its lawyer’s reply, before the Bombay High Court
seeking a declaration that the DTD stood amended by virtue of the e-mails
dated 16.03.2022 and 23.03.2022 and for consequential reliefs. The
defendants in the said suit were the debenture trustee, ECLF, and other
members of the Edelweiss group. However, by order dated 13.09.2022, a
learned Judge of the Bombay High Court refused to grant an interim
injunction restraining the defendants from initiating any action under the
DTD and from demanding any payments thereunder. The learned Judge
held that, in the absence of modification of the terms of the DTD in
accordance with the method prescribed therein, the respondent company
could not be said to have made out a prima facie case for restraining the
defendants in the suit from exercising the rights which flowed from the
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DTD. The learned Judge took note of the fact that there was no
compliance with clause 33 of the DTD, which required prior written
consent of the debenture holders. Unfortunately, this order by the
competent civil Court, which is stated to have attained finality, was
casually brushed aside by the NCLT and the NCLAT.
We may also note that clause 28 of the DTD deals with ‘release of
17.
secured assets’ and clause 28.3 therein provides that, at all times until the
final settlement date, the respondent company shall be entitled to release
of the security interest created over the ‘additional property’, mortgaged
by Variegate Real Estate Pvt. Ltd., upon payment of ₹50 crore by the
respondent company towards redemption of the debentures. The
‘additional property’ referred to in this clause is defined in clause 1.1 as
the parcel of land of 15,138 square feet situated on Turner Road, Bandra
(W), Mumbai, to be mortgaged by Variegate Real Estate Pvt. Ltd. The final
settlement date, as defined, means the day on which the debentures are
redeemed to the satisfaction of the debenture trustee. The release of this
property assumes importance as the same was construed by the NCLT
and the NCLAT to be a factor weighing in favour of the respondent
company’s claim that its restructuring proposal had been accepted and
acted upon. However, the letter dated 29.03.2022 addressed by the
debenture trustee to Variegate Real Estate Pvt. Ltd., the respondent
company and Shobhit J. Rajan in relation to release of the Bandra
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property from the mortgage stands on a different footing as it was relatable
to clause 28.3 of the DTD and not the respondent company’s restructuring
proposal. The release of this property seems to have taken place upon
the respondent company transferring monies towards redemption of the
debentures after receiving the additional funding of ₹152 crore.
In terms of the law laid down by this Court in
18. Indus Biotech Private
3
, a
Limited vs. Kotak India Venture (Offshore) Fund and others
corporate debtor is entitled to establish that the financial debt is not due
and no default had occurred in that regard to defeat a financial creditor’s
application for corporate insolvency resolution process under Section 7 of
the Code. However, such an exercise cannot assume an indirect way of
raising a pre-existing dispute, which would be available only to ward off
an operational creditor’s claim under Section 9 of the Code. There is no
escaping the fact that the entire case of the respondent company is built
on the so-called restructuring of the loan facility under the DTD, but it is
an admitted fact that the procedure prescribed under the DTD for such
modification and variation of the terms thereunder was not adhered to. We
may also note that Section 62 of the Contract Act, 1872, speaks of
novation of a contract when the parties to that contract agree to substitute
a new contract for it, i.e., all the parties to such contract must be in
3
(2021) 6 SCC 436
14
consensus as to such substitution. Presently, the admitted position is that
the debenture trustee and the other debenture holders were not even privy
to the discussion as to the modification of the DTD at the relevant time, let
alone being consenting parties thereto. The question of ‘estoppel’ being
pressed into service by the respondent company against ECLF and the
other debenture holders also does not arise as any waiver of the terms
stipulated in the DTD had to be in accordance with the procedure
prescribed therein, under clause 33, i.e., by way of a written document.
Admittedly, there is no written document to support such a plea.
19. Further, the NCLAT’s inference that the respondent company was
entitled to claim a legitimate expectation that the moratorium and release
of properties would be acted upon by the debenture trustee and the other
debenture holders is equally without merit. The DTD prescribed a detailed
method for modification of the terms thereof and would not stand altered
by any such expectation based on the unilateral exchange between the
respondent company and ECLF, which did not fructify to a crystalised
commitment even on the part of ECLF. ECLF’s e-mail dated 30.03.2022
put the respondent company on notice that, though it was agreeable to
the restructuring proposal and the grant of a moratorium, it would need to
run the entire process internally based on the overall resolution process
in compliance with the terms of the DTD. Therefore, the respondent
company could not have assumed that ECLF had already agreed to the
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restructuring proposal without further ado and that the same was binding
upon all concerned. In this regard, the observations made by the NCLAT
against ECLF are without basis as the aforestated communication from
ECLF to the respondent company demonstrates that no promise was held
out by it as to the restructuring and all that was stated was that the
proposal would be considered as per due procedure.
The conclusion drawn by the NCLAT as to the debenture trustee
20.
colluding with the debenture holders does not hold water as the debenture
trustee was enjoined by the DTD to protect the interest of the debenture
holders. Even on facts, the question of collusion between them was not
made out. The NCLAT’s notion that the debenture trustee was required to
act with fairness and protect the interest of the respondent company is
contrary to the duty and obligation cast upon the debenture trustee under
the DTD, which is to protect the interests of the debenture holders. The
finding that the debenture trustee acted in unison with the debenture
holders in catalysing their dubious designs to drag the respondent
company towards insolvency is, therefore, incorrect. The adverse remarks
made against the debenture trustee are, accordingly, set aside.
21. Though, the NCLAT was persuaded to record that the respondent
company, having received ₹600 crore of the ₹850 crore under the DTD,
had already repaid ₹508.48 crore, it lost sight of the passage of time,
whereby the principal coupled with the interest due were much higher,
16
resulting in gross disparity between what was claimed by the respondent
company and the reality of the amount actually due and payable by it.
22. Ordinarily, this Court would not choose to reappreciate a matter on
facts when the jurisdictional National Company Law Tribunal and, in
appeal, the National Company Law Appellate Tribunal have recorded
concurrent findings. The exception to this self-imposed rule would be
when the perversity of such concurrent findings is clearly established. We
find the present case to be one such case, where the perversity of the
findings recorded by the NCLT and by the NCLAT is glaring and manifest,
beseeching interference by this Court at the second appellate stage.
23. We, accordingly, hold that the NCLT and the NCLAT erred in
ignoring the binding terms of the Debenture Trust Deed dated 27.03.2018
and in reframing the terms thereof on the strength of surmises,
conjectures and assumptions, which were not borne out on facts and were
completely unsustainable in law. Company Petition (IB) 922/MB/C-I/2022
filed by Catalyst Trusteeship Limited, the debenture trustee, deserved to
be admitted under Section 7 of the Code.
24. In consequence, the order dated 03.02.2023 passed by the National
Company Law Tribunal, Mumbai Bench-I, and the judgment dated
16.04.2025 passed by the National Company Law Appellate Tribunal,
Principal Bench, New Delhi, are set aside. Company Petition (IB)
922/MB/C-I/2022 is restored to the file of the National Company Law
17
Tribunal, Mumbai Bench-I, and the same shall be admitted by way of a
separate order. Necessary further steps shall be initiated thereafter as per
due procedure.
The appeal is allowed in the aforestated terms.
..............................., J.
SANJAY KUMAR
..............................., J.
K. VINOD CHANDRAN
FEBRUARY 24, 2026
NEW DELHI.
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