NCLT Must Verify ED Attachment Before Refusing Property Release To Successful Resolution Applicant : NCLAT
The National Company Law Appellate Tribunal (NCLAT) on Tuesday held that the National Company Law Tribunal (NCLT), Mumbai, should have verified whether a Bangalore-based flat was provisionally attached by the Enforcement Directorate (ED) before refusing its release to the successful resolution applicant (SRA) of insolvent DSK Southern Projects Pvt. Ltd.A coram comprising of Judicial...
The National Company Law Appellate Tribunal (NCLAT) on Tuesday held that the National Company Law Tribunal (NCLT), Mumbai, should have verified whether a Bangalore-based flat was provisionally attached by the Enforcement Directorate (ED) before refusing its release to the successful resolution applicant (SRA) of insolvent DSK Southern Projects Pvt. Ltd.
A coram comprising of Judicial Member Justice Mohd Faiz Alam Khan and Technical Member Indevar Pandey observed,
"...the adjudicating authority has committed manifest illegality in not ascertaining as to whether the aforesaid flat was in fact provisionally attached by the ED by passing the provisional attachment order date d 19.02.2024 and without ascertaining the same the liberty has been given to the appellant to approach the Respondent and the ball has been placed in the court of the Respondent while it was the utmost duty of the adjudicating authority to adjudicate on the issue as to whether the aforesaid property was actually provisionally attached by the ED.”
The dispute arose after the director and the SRA- a consortium of Shiv Charan, Bharti Agarwal, and Pushplata Bai, filed an application seeking release of the flat, claiming that it was never attached by the ED and therefore not protected by the Supreme Court's interim order continuing existing attachments.
The corporate insolvency resolution process (CIRP) against DSK Southern Projects commenced on 9 December 2021, and the consortium's resolution plan was approved by the committee of creditors (CoC) and the NCLT.
Earlier, the ED had provisionally attached 14 unsold flats in Mantri Pinnacle, valued at around Rs 32.51 crore, but the flat in question was not listed among them.
While the Bombay High Court had ruled that ED attachments cease to operate after approval of a resolution plan under Section 32A of the Insolvency and Bankruptcy Code (IBC), the Supreme Court ordered that attachments continue until the pendency of a special leave petition (SLP). The NCLT rejected the application for release, citing compliance with the Supreme Court's directions, prompting the consortium to appeal before the NCLAT.
The appellate tribunal emphasized that the NCLT cannot place the burden on the SRA to provide indemnity without first verifying whether the flat was actually attached:
“It was the utmost duty of the Adjudicating Authority to adjudicate whether Flat No. 2402 was actually attached under the provisional attachment order dated 14.02.2019.”
The NCLAT further noted that the Supreme Court's order only continued existing attachments, and the flat in question was not part of them:
“If the property was not found attached by the ED vide order dated 14.02.2019 it was within the jurisdiction and power of the adjudicating authority to release the same in favour of the appellant, as the Hon'ble Supreme Court vide above order has only continued the provisional attachment order dated 19.02.2024, whereby certain properties of the CD were provisionally attached and this property is not reflecting in the said attachment order.”
Accordingly, the appeallate remanded the matter to the NCLT for verification of the ED's attachment order.
Case Title: Mohan Reddy Bhumi Reddy Gari. Versus STCI Finance Limited
Case Number: Company Appeal (AT) (Insolvency) No. 1279 of 2025
For Appellant : Advocate G Aniruth Purusothaman
For Respondent : Advocate Ayush J Rajani, Adv