Parties with affected substantive rights are necessary and proper parties entitled to impleadment in insolvency appeals.

The Corporate Debtor (CD), M/s Isinox Ltd., was first admitted to CIRP on 17.03.2023 under Section 7 of the IBC.

This order was stayed on 11.04.2023 and finally set aside on 16.12.2024.

During the pendency of the first appeal, a second Section 9 application was admitted against the same CD on 18.07.2024, triggering a new moratorium.

While this second moratorium was in force, Indian Bank (Respondent 3) sold a secured asset of the CD to M/s Vehicles Recyclers India Pvt. Ltd. (Respondent 4) on 31.12.2024.

Indian Bank and the purchaser moved applications (I.A. 6364 & 6174 of 2025) for impleadment in the ongoing appeal against the second CIRP admission, arguing that their rights over the sold asset are now in peril.

Whether third parties (a secured creditor and a subsequent purchaser) whose rights are affected by a moratorium have a right to be impleaded as necessary or proper parties in an appeal challenging the admission of a Corporate Debtor to CIRP.

The Tribunal applied the principle of Audi Alteram Partem and the civil procedure doctrine regarding "necessary and proper parties."

It held that where a civil right is in peril of being affected by a judicial proceeding, the affected person has an inherent right to be heard.

Under the Constitutional scheme, judicial fora cannot deny the right of hearing when substantive rights are exposed to forensic scrutiny.

The Tribunal also considered the effect of Section 14 of the Insolvency and Bankruptcy Code, 2016, regarding the validity of asset sales during a moratorium.

The Court reasoned that Indian Bank and the purchaser are facing "collateral damage" because the sale of the secured asset occurred while a moratorium was technically in force due to the second CIRP admission.

Although the Appellant argued that the Bank acted in bad faith and that a second CIRP is legally permissible even during the subsistence of a first one, the Tribunal distinguished between the "merit of the case" and the "procedural right to be heard."

The Court observed that the purchaser is currently in "no man’s land" and the Bank’s interest is at stake because the IRP/RP may target the property already sold.

To ensure justice is seen to be done, the Tribunal determined that the applicants are necessary parties to resolve the dispute regarding the legality of the second CIRP and the protection of their transaction.

The Appellant was directed to file an amended memo of parties and serve appeal papers within three days.

The newly added Respondents were granted until 27th March 2026 to file objections, with the matter listed for further hearing on 15th April 2026.