IRP Not Bound To Rely On Entity-Level Loan Documents In Project-Specific Insolvency: NCLT Bengaluru

The National Company Law Tribunal (NCLT) at Bengaluru has held that an Interim Resolution Professional may partially admit a financial creditor's claim where insolvency is confined to a single real estate project, and is not bound to mechanically accept entity-level loan claims. A coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada, in an order dated November 28, 2025, upheld the partial admission of a claim filed by Asset Care and Reconstruction Enterprise Ltd (ARC) in the corporate insolvency resolution process of LGCL Urban Homes (India) LLP. The tribunal observed, “The IRP cannot be expected to admit claims blindly based on entity-level loan documents when the insolvency is restricted to a single project. The IRP's reliance on Regulation 14 to make a "best estimate" based on the value of the security interest mortgaged unsold units was a reasonable and statutorily compliant approach in the absence of concrete evidence of fund utilization and she has done it quite meticulously by offering sound reasons.” The dispute arose from two loan facilities extended to LGCL Urban Homes under agreements dated September 15, 2020 and January 27, 2022 for working capital requirements across multiple projects. The original lender, PHL Fininvest Pvt Ltd, later merged into Piramal Enterprises Ltd on August 12, 2022, and the loans along with the security interests were subsequently assigned to ARC under an assignment agreement dated March 27, 2023. GCL Urban Homes was admitted into insolvency on November 14, 2024. The CIRP, however, was expressly restricted to the real estate project “United Towers.” A public announcement inviting claims was issued on November 21, 2024.ARC filed a claim of Rs 101.48 crore on December 2, 2024, contending that the loans had been disbursed at the entity level and were therefore fully admissible in the CIRP.During claim verification, the IRP sought project-specific utilisation details. She noted that construction of the United Towers project had stopped in 2019. This was prior to the first loan disbursement on August 10, 2020. ARC failed to produce material showing that the loan proceeds were utilised for the project under insolvency. The IRP therefore partially admitted the claim to the extent of Rs 5.6 crore. This was based on the value of the mortgaged unsold units forming part of the project. Upholding this approach, the tribunal held that where the CIRP is confined to a single project, the burden lies on the creditor to establish a nexus between the debt and the project for which insolvency has been initiated. It found the IRP's reliance on Regulation 14 of the CIRP Regulations to arrive at a best estimate to be “reasonable and statutorily compliant.” The tribunal also noted that the applicant had frustrated the verification process by failing to furnish the documents sought. It observed that admitting the entire claim would allow a creditor to saddle a project with liability on the basis of entity-level loans disbursed in 2020, even though the project itself had ceased in 2019. The tribunal dismissed the application and upheld the classification of ARC as an 'other creditor.' It held that ARC had failed to establish that the financial debt was specifically attributable to the United Towers project. Case Title: Asset Care and Reconstruction Enterprise Limited vs Ramanathan Bhuvaneshwari Case Number: IA 107/BB/2025 in CP(IB) No. 112/BB/2023 For RP: Advocate Srinandan K For Petitioner: Advocates Nikhil Mehndiratta, Nidhisha Choksi Click Here To Read/Download Order

IRP Not Bound To Rely On Entity-Level Loan Documents In Project-Specific Insolvency: NCLT Bengaluru

Kirit Singhania

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