Insolvency Proceedings Against Mahagun Invalidated; NCLAT Flags Due Process Violations

The National Company Law Appellate Tribunal has set aside the NCLT order admitting Mahagun (India) Pvt Ltd into corporate insolvency, holding that the adjudicating authority failed to grant the corporate debtor adequate opportunity to file a detailed reply before reserving orders.

The Tribunal directed that the Section 7 petition filed by IDBI Trusteeship Services Ltd be reconsidered in accordance with law and in light of the Supreme Court’s judgment requiring project-specific treatment of real estate insolvency.

The matter was decided by a Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member Technical).

The Bench noted that although the NCLT had granted one week’s time on 13.06.2025 for filing a reply, only a short preliminary reply could be filed and the request for further time on 18.07.2025 was declined before the petition was immediately reserved for orders. The Tribunal observed that “adequate opportunity was not allowed to the Appellant to oppose the CIRP” and held that the Section 7 petition must be heard afresh, keeping in view the Supreme Court’s decision in Mansi Brar Fernandes v Shubha Sharma, which requires real estate CIRP to proceed project-wise unless circumstances justify otherwise.

The financial creditor had moved the NCLT alleging default in redemption of debentures issued exclusively for the Mahagun Manorialle project in Noida. Notice was issued on 21.02.2025 and the matter was taken up for the first time on 13.06.2025.

Mahagun was permitted one week to file a reply, and a short preliminary reply, confined to maintainability, was filed on 17.07.2025.

On 18.07.2025, Mahagun informed the NCLT that the detailed reply containing project-wise financial information and material on distinct lenders and homebuyers across several ongoing projects had not yet been filed and sought additional time.

The request was rejected and the matter was reserved the same day.

Subsequently, written submissions dated 30.07.2025 were filed, placing on record the fact that the debenture trust deed of 10.12.2020 pertained only to Mahagun Manorialle, while several other projects; Mahagun Mywoods Phases 1 and 2, Mahagun Montage, Mahagun Mascot, Mahagun Metro Mall and Mahagun Sarovar Portico Suites & Hotel, had distinct funding structures, separate secured lenders and no defaults. It was also submitted that the rights of more than 8000 allottees, including over 300 from Mahagun Manorialle alone, would be adversely affected if CIRP was initiated across all projects.

The CD also placed on record its ongoing negotiations for settlement and filed an application on 04.08.2025 seeking two weeks time to conclude it, but the matter was not listed and the NCLT admitted the petition on 05.08.2025.

Multiple appeals were filed before the NCLAT: by the suspended director of Mahagun, by Aditya Birla Capital Ltd (the secured lender for four other Mahagun projects), and by the Manorialle Social Welfare Society representing 195 homebuyers. Various intervention applications were also filed by homebuyers from other projects, including Mahagun Mywoods, Mahagun Montage and Crossings Republik.

While some urged that the CIRP be set aside in view of the settlement, others sought continuation of CIRP, and some requested that it be restricted solely to Mahagun Manorialle.

During the pendency of the appeals, Mahagun and IDBI Trusteeship Services placed on record a settlement dated 21.08.2025 and sought orders to facilitate filing of a Section 12A application before the NCLT.

The Tribunal also took note of the Supreme Court’s judgment in Mansi Brar Fernandes delivered on 12.09.2025, which held that real estate insolvency must normally proceed only with respect to the specific project where default occurred.

The NCLAT recorded that Mahagun was executing several large-scale projects with over 11,000 homebuyers in different phases of possession, and that a company-wide CIRP could not be sustained without examining the records project-wise.

The Tribunal also considered intervention applications filed by Aditya Birla Capital Ltd and homebuyers from Mywoods, Manorialle, Mascot and other projects, noting that the adjudicating authority must hear all applicants and determine whether CIRP, if warranted, should be confined to the Mahagun Manorialle project.

The Bench clarified that it was not expressing any opinion on the merits of the Section 7 petition but held that such issues must be adjudicated after giving all parties a fair opportunity.

Allowing the appeals, the NCLAT set aside the 05.08.2025 order, restored the Section 7 petition and granted Mahagun one week to file a detailed reply before the NCLT, with a week thereafter for rejoinder.

The adjudicating authority has been directed to list the matter for hearing after two weeks and then determine whether CIRP should proceed and, if so, whether it should be restricted to Mahagun Manorialle as per the Supreme Court’s jurisprudence.

For the Appellant Mahagun, appearances were by Abhijeet Sinha, Gaurav Mirtra and Gaurav H Sethi along with Anmol Joshi, Rahul kapoor and Rahul Pawar.

For the Respondent, appearances were by Krishnendu Datta, Snr Adv with Somdutta Bhattacharya, Kiran Sharma and Niharika Sharma.

For Homebuyers, appearances were by Gopal Jain Snr Adv, Sumesh Dhawan, Sujoy Datta, Aman Sharma and Abhinav Tyagi.

Case Title: Amit Jain v IDBI Trusteeship Services Ltd & connected appeals

Bench: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member Technical)

Order Date: 6.11.2025 (setting aside 05.08.2025 NCLT order)