IDBI Trusteeship Can Initiate CIRP If There Is Valid Authorization From Assignee Of Debt: NCLAT New Delhi

The NCLAT, Principal Bench, New Delhi, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical), has held that a security trustee can file a section 7 application seeking initiation of the CIRP if there is a valid authorization from the assignee of the debt. The present appeal was filed by the suspended director challenging the impugned order passed by the NCLT, Mumbai, court-II, admitting the section 7 application filed by the IDBI Trusteeship. The main issue that came for consideration before the NCLAT was whether IDBI Trusteeship had valid authorization to initiate CIRP against the corporate debtor. Contention of the Parties The appellant argued that the IDBI Trusteeship was acting as the security trustee, and it didn't have the valid authorization from the assignee of the loan to file an application for CIRP. Hence, the proceeding is unauthorized and liable to be set aside. Relying on the rulings of Malavika Hegde vs. IDBI Trusteeship Services Ltd. and Anr., (2025) SCC OnLine NCLAT 422 and M Sai Eswara Swamy vs. Siti Vision Digital Media Pvt. Ltd., 2021 SCC OnLine NCLAT 3444, the appellant submitted that the respondent had no locus to file the present application without the valid authorization. The respondent submitted that it took the assignment from the original lender, and it also highlighted that the IDBI Trusteeship had received the email from the original lender to initiate section 7 proceedings. It also highlighted that this tribunal had upheld the CIRP of the principal borrower initiated by the NCLT; therefore, the present appeal deserved to be dismissed. Observations of the NCLAT The tribunal observed that the instructions dated 15.03.2023 and 23.03.2023 clearly authorized the IDBI Trusteeship to initiate the CIRP proceedings. It further observed that the security trustee agreement remained valid as the assignee stepped into the shoes of the original lender, and the IDBI Trusteeship continued to act in its authorized capacity. Also, the bench clarified that the cases relied on by the appellants are not correct, as no valid authorization was proved in those cases. But here in the present case, the authorization was pleaded and rightly proved. Furthermore, the bench noted that the initiation of the CIRP against the principal borrower had already been upheld by the tribunal; therefore, we don't find any infirmity in the initiation of the CIRP against the corporate guarantors. Accordingly, the appeal was dismissed due to lack of merit. Case Name: Deepak Raheja & Anr. v. IDBI Trusteeship Services Ltd. & Anr. Case No.: Company Appeal (AT) (Insolvency) No. 180 of 2025 Bench: Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member-Technical) Judgment Date: 12.09.2025Click Here To Read/Download The Order

IDBI Trusteeship Can Initiate CIRP If There Is Valid Authorization From Assignee Of Debt: NCLAT New Delhi

Mohd.Rehan Ali

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