# Elegna Co-op. Housing and Commercial Society Ltd v. Edelweiss Asset Reconstruction Company Limited & Anr

- **Citation:** 2026 INSC 58
- **Court:** Supreme Court of India
- **Decided:** 2026-01-15
- **Case number:** Civil Appeal No. 10261 of 2025
- **Bench:** J.B. Pardiwala, R. Mahadevan
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/elegna-co-op-housing-and-commercial-society-ltd-v-edelweiss-asset-39135
- **Pages:** 54

## Headnote

Issue arose whether the NCLAT was correct in admitting Corporate
Debtor into the Corporate Insolvency Resolution Process; and
whether the NCLAT was correct in rejecting the Intervention
application filed by the Society.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - ss.5(8)(f), 7,
7(5)(a) - Corporate Insolvency Resolution Process (CIRP) -
Admission of the Corporate Debtor into CIRP - Locus standi
to intervene in proceedings u/s.7 - Appellant-Corporate
debtor availed financial assistance of Rs.70 crores from ECLOriginal Lender for the development of the residential-cumcommercial project - Appellant failed to pay loan installments,
and thereafter the accounts were declared NPA - Original
Lender transferred all its rights, title, and interest in the said
loan to EARCL-Financial Creditor - Appellant failed in making
the payment despite entering into One Time Settlement
Agreement - Financial Creditor initiated CIRP u/s.7, in order
to recover the loan amount - NCLT dismissed the petition
holding that the facts did not warrant initiation of the CIRP as
IBC was being invoked as a recovery mechanism rather than
as a tool for insolvency resolution; and that the project was
viable and substantially complete and CIRP process would
adversely affect the interests of the homebuyers - NCLAT
set aside the order of NCLT and directed admission of the
application u/s.7 - ECHCS (Society)-association of homebuyers
moved intervention application before the NCLAT, which was
dismissed for want of locus - Correctness:
* Author
[2026] 1 S.C.R.
851
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
Held: Once the Adjudicating Authority is satisfied that a financial
debt exists and a default has occurred, it must admit the application
unless it is incomplete - Inquiry u/s.7(5)(a) is confined strictly to the
determination of debt and default, leaving no scope for equitable
or discretionary considerations - Corporate Debtor admittedly
possesses no adjudicated or realisable claim exceeding the amount
in default - Its reliance on business viability, unsold inventory,
project status, or anticipated receivables does not constitute "good
reasons" in law to defer or deny admission of CIRP - Existence
of a financial debt owed to EARCL is undisputed - Persistent
defaults stand admitted and are conclusively established on
record, including breach of the restructuring agreement and
failure to pay instalments within the stipulated cure period -
Restructuring arrangement failed due to non-payment by the
Corporate Debtor, thereby triggering an express event of default
under its terms - NCLAT correctly held that considerations such
as ongoing operations, partial project completion, or anticipated
receivables are extraneous to the statutory mandate u/s.7 - It
cannot be said that EARCL misused the Code as a recovery
tool - Allegations of mala fide invocation neither pleaded or
established - Circumstances, taken cumulatively, substantiated
EARCL's request for initiation of CIRP - Thus, impugned judgment
admitting the Corporate Debtor into the CIRP does not suffer from
any legal infirmity - As regards the rejection of the intervention
application filed by the society, the appellant Society neither a
financial nor an operational creditor - It is a maintenance society
not constituted for insolvency representation - No documentary
proof of registration, collective authorisation, or general body
resolution produced - Membership is automatic and mandatory,
negating consensual representation - Intervention application filed
only at the appellate stage and not before the NCLT - Society
not a party to the financial transaction forming the substratum of
the s.7 application, hence, no statutory right of appeal inheres
in the appellant - Right to initiate or participate in insolvency
proceedings is statutory, not equitable - Society or Resident
Welfare Association, not being a creditor in its own right and not
recognised as an

## Text

_Characters 0–39,624 of 106,307. This is a partial read: ask again with offset=39624 for what follows._

[2026] 1 S.C.R. 850 : 2026 INSC 58
Elegna Co-op. Housing and Commercial Society Ltd.
v.
Edelweiss Asset Reconstruction Company Limited & Anr.
(Civil Appeal No. 10261 of 2025)
15 January 2026
[J.B. Pardiwala and R. Mahadevan,* JJ.]
Issue for Consideration
Issue arose whether the NCLAT was correct in admitting Corporate
Debtor into the Corporate Insolvency Resolution Process; and
whether the NCLAT was correct in rejecting the Intervention
application filed by the Society.
Headnotes†
Insolvency and Bankruptcy Code, 2016 - ss.5(8)(f), 7,
7(5)(a) - Corporate Insolvency Resolution Process (CIRP) -
Admission of the Corporate Debtor into CIRP - Locus standi
to intervene in proceedings u/s.7 - Appellant-Corporate
debtor availed financial assistance of Rs.70 crores from ECLOriginal Lender for the development of the residential-cumcommercial project - Appellant failed to pay loan installments,
and thereafter the accounts were declared NPA - Original
Lender transferred all its rights, title, and interest in the said
loan to EARCL-Financial Creditor - Appellant failed in making
the payment despite entering into One Time Settlement
Agreement - Financial Creditor initiated CIRP u/s.7, in order
to recover the loan amount - NCLT dismissed the petition
holding that the facts did not warrant initiation of the CIRP as
IBC was being invoked as a recovery mechanism rather than
as a tool for insolvency resolution; and that the project was
viable and substantially complete and CIRP process would
adversely affect the interests of the homebuyers - NCLAT
set aside the order of NCLT and directed admission of the
application u/s.7 - ECHCS (Society)-association of homebuyers
moved intervention application before the NCLAT, which was
dismissed for want of locus - Correctness:
* Author
[2026] 1 S.C.R.
851
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
Held: Once the Adjudicating Authority is satisfied that a financial
debt exists and a default has occurred, it must admit the application
unless it is incomplete - Inquiry u/s.7(5)(a) is confined strictly to the
determination of debt and default, leaving no scope for equitable
or discretionary considerations - Corporate Debtor admittedly
possesses no adjudicated or realisable claim exceeding the amount
in default - Its reliance on business viability, unsold inventory,
project status, or anticipated receivables does not constitute "good
reasons" in law to defer or deny admission of CIRP - Existence
of a financial debt owed to EARCL is undisputed - Persistent
defaults stand admitted and are conclusively established on
record, including breach of the restructuring agreement and
failure to pay instalments within the stipulated cure period -
Restructuring arrangement failed due to non-payment by the
Corporate Debtor, thereby triggering an express event of default
under its terms - NCLAT correctly held that considerations such
as ongoing operations, partial project completion, or anticipated
receivables are extraneous to the statutory mandate u/s.7 - It
cannot be said that EARCL misused the Code as a recovery
tool - Allegations of mala fide invocation neither pleaded or
established - Circumstances, taken cumulatively, substantiated
EARCL's request for initiation of CIRP - Thus, impugned judgment
admitting the Corporate Debtor into the CIRP does not suffer from
any legal infirmity - As regards the rejection of the intervention
application filed by the society, the appellant Society neither a
financial nor an operational creditor - It is a maintenance society
not constituted for insolvency representation - No documentary
proof of registration, collective authorisation, or general body
resolution produced - Membership is automatic and mandatory,
negating consensual representation - Intervention application filed
only at the appellate stage and not before the NCLT - Society
not a party to the financial transaction forming the substratum of
the s.7 application, hence, no statutory right of appeal inheres
in the appellant - Right to initiate or participate in insolvency
proceedings is statutory, not equitable - Society or Resident
Welfare Association, not being a creditor in its own right and not
recognised as an authorised representative of allottees under
the IBC, has no locus standi to intervene in proceedings arising
out of a s.7 petition - NCLAT justified in rejecting the Society's
intervention application - No prejudice caused to homebuyers,
852
[2026] 1 S.C.R.
Supreme Court Reports
whose interests are adequately safeguarded under the Code -
Upon commencement of CIRP, any aggrieved stakeholder may
avail remedies strictly in accordance with the Code. [Paras 12.3,
12.8-12.12, 12.18, 12.21, 12.22, 13.7, 13.8, 13.17, 13.22, 15]
Insolvency and Bankruptcy Code, 2016 - Cases of insolvency
against the project developers - Safeguarding the interests
of homebuyers - Issuance of directions to the Committee of
Creditors:
Held: While the commercial wisdom of the Committee of CreditorsCoC is paramount and is not ordinarily amenable to judicial
review, the width of powers vested in the CoC carries with it a
corresponding duty of responsibility - Any extraordinary or nonroutine decision taken by the CoC must, thus, be supported by
cogent reasons duly recorded in writing - With a view to advancing
transparency, ensuring accountability, and safeguarding the
interests of homebuyers, issuance of directions - Information
Memorandum to mandatorily disclose comprehensive and complete
details of all allottees - Where the CoC, upon due consideration,
finds it not viable to approve handover of possession in terms
of the CIRP Regulations, it shall mandatorily record cogent and
specific reasons in writing for such decision - Any recommendation
for liquidation by the Committee of Creditors to be accompanied
by a reasoned justification recorded in writing evidencing proper
application of mind and due consideration of all viable alternatives,
in consonance with the objective of the Code - These directions
to operate prospectively and to be complied with forthwith.
[Para 15.1]
Case Law Cited
Innoventive Industries Ltd v. ICICI Bank [2017] 8 SCR 33 : (2018)
1 SCC 407; ES. Krishnamurthy v. Bharath Hi- Tech Builders Pvt.
Ltd [2021] 12 SCR 28 : (2022) 3 SCC 161; Swiss Ribbons (P)
Ltd. v. Union of India [2019] 3 SCR 535 : (2019) 4 SCC 17; Indus
Biotech Private Ltd. v. Kotak India Venture (Offshore) Fund and
Others [2021] 7 SCR 112 : (2021) 6 SCC 436; GLAS Trust Co.
LLC v. BYJU Raveendran, 2024 INSC 811 : [2024] 10 SCR 1802 :
(2025) 3 SCC 625 - relied on.
Vidarbha Industries Power Ltd v. Axis Bank Ltd [2022] 12 SCR
139 : (2022) 8 SCC 352 - distinguished.
[2026] 1 S.C.R.
853
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
Pioneer Urban Land and Infrastructure Ltd v. Union of India [2019]
10 SCR 381 : (2019) 8 SCC 416; Chitra Sharma v. Union of India
[2018] 12 SCR 1044 : (2018) 18 SCC 575; Mobilox Innovations
Pvt. Ltd. v. Kirusa Software Pvt. Ltd [2017] 10 SCR 1006 :
(2018) 1 SCC 353; State Bank of India v. Hubtown Bus Terminal
(Vadodara) Pvt. Ltd., R/LPA No. 1 of 2022 in R/Special Civil
Application No. 10985 of 2021 etc. cases dated 18.10.2022; M.
Suresh Kumar Reddy v. Canara Bank and Others [2023] 5 SCR
387 : 2023 SCC OnLine SC 608; Kotak Mahindra Bank Ltd. v. A.
Balakrishnan and Another [2022] 5 SCR 1072 : (2022) 9 SCC 186;
Tottempudi Salalith v. SBI [2023] 14 SCR 492 : (2024) 1 SCC 24;
Haldiram Incorporation (P) Ltd. v. Amrit Hatcheries (P) Ltd, 2023
SCC OnLine SC 1706; Karad Urban Cooperative Bank Limited v.
Swwapnil Bhingardevay and Others [2020] 13 SCR 465 : (2020) 9
SCC 729; Independent Sugar Corpn. Ltd. v. Girish Sriram Juneja
& Ors., 2025 INSC 124 : [2025] 1 SCR 1782 : (2025) 5 SCC 209;
Phoenix ARC Pvt. Ltd v. Spade Financial Services Ltd [2021]
15 SCR 1079 : (2021) 3 SCC 475; Bishambhar Prasad v. Arfat
Petrochemicals Pvt. Ltd. and Others [2023] 7 SCR 230 : 2023
SCC OnLine SC 458; Mansi Brar Fernandes v. Shubha Sharma
and Another, 2025 INSC 1110 : [2025] 10 SCR 169 - referred to.
List of Acts
SARFAESI Act, 2002; Real Estate (Regulation and Development)
Act, 2016; Companies Act, 2013; Consumer Protection Act, 2019;
Insolvency and Bankruptcy Code, 2016; Code of Civil Procedure,
1908; Security Interest (Enforcement) Rules, 2002; IBBI (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016;
NCLAT Rules, 2016; Constitution of India.
List of Keywords
Corporate Insolvency Resolution Process (CIRP); Admission of
the Corporate Debtor into CIRP; Initiation of CIRP; Locus standi
of society; One time settlement agreement; Recovery mechanism;
Residential project; Home buyers' society; Interests of homebuyers;
Financial debt exists; Default; Determination of debt; No discretion
survives once default is established; Concept of revival; Financial
distress; Safeguarding the interests of homebuyers; Issuance of
directions to the Committee of Creditors.
854
[2026] 1 S.C.R.
Supreme Court Reports
Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 10261 of 2025
From the Judgment and Order dated 01.07.2025 of the National
Company Law Appellate Tribunal in CAAT No. 2261 of 2024
With
Civil Appeal No. 10012 of 2025
Appearances for Parties
Advs. for the Appellant(s):
Ms. Madhavi Diwan, Nikhil Goel, Sr. Advs., Ms. Purti Gupta, Arjun
Sheth, Rishabh Shah, Ms. Pooja Aggarwal, Ms. Henna George,
Ms. Sunidhi Sah.
Advs. for the Respondent(s):
P Nagesh, Nikhil Goel, Sr. Advs., Abhishek Agarwal, Atul Sharma,
Ms. Renuka Iyer, Aditya Vashith, Anmol Bansal, Ms. Henna George,
Ms. Sunidhi Sah.
Judgment / Order of the Supreme Court
Judgment
R. Mahadevan, J.
1.
The present appeals are directed against the final judgment and order
dated 01.07.2025 passed by the National Company Law Appellate
Tribunal1, Principal Bench, New Delhi, in Company Appeal (AT)
(Insolvency) No. 2261 of 2024.
2.
By the impugned judgment, the NCLAT set aside the order dated
06.11.2024 passed by the Adjudicating Authority, National Company
Law Tribunal2, Ahmedabad Bench, in CP (IB) No. 140 (AHM) / 2024,
and directed admission of the application filed under Section 7 of
the Insolvency and Bankruptcy Code, 20163, thereby initiating the
1
For short, "NCLAT"
2
For short, "NCLT"
3
For short, "IBC"
[2026] 1 S.C.R.
855
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
Corporate Insolvency Resolution Process4 against the appellant in
C.A. No. 10012 of 2025 - Takshashila Heights India Private Limited.
The NCLAT further rejected the intervention application filed by the
appellant in C.A. No. 10261 of 2025 - Elegna Co-operative Housing
and Commercial Society Ltd.5 on the ground that it lacked locus
standi to intervene in the aforesaid company appeal.
3.
For the sake of convenience, the parties to the present appeals are
arrayed as under:
Name of the
Party
Before NCLT
[CP (IB) No.
104(AHM)/2024]
Before NCLAT
[CA (AT) (Ins.)
No. 2261 of
2024]
Before this
Court
[CA No. 10261
of 2025 / CA
No. 10012 of
2025]
Elegna Cooperative Housing
and Commercial
Society Ltd.
Not a party
Intervenor
Appellant / -
Takshashila
Heights India
Private Ltd.
(Corporate
Debtor)
Respondent
Respondent
Respondent
No. 2 /
Appellant
Edelweiss Asset
Reconstruction
Company Ltd.
(Financial
Creditor)
Applicant
Appellant
Respondent
No. 1 /
Respondent
Brief facts
4.
The necessary facts leading to the filing of the present appeals are
as follows:
4.1. The appellant in C.A. No. 10012 of 2025 (Corporate Debtor)
availed financial assistance of Rs. 70 crores from ECL Finance
Ltd. (Original Lender), on 19.07.2018 under two term loan
4
For short, "CIRP"
5
For short, "Society"
856
[2026] 1 S.C.R.
Supreme Court Reports
facilities, for the purpose of developing a residential -cum-
commercial project titled "Takshashila Elegna". To secure
the said facilities, the Corporate Debtor and its promoters
executed loan agreements, promissory notes, and other security
documents on 25.07.2018 (for Term Loan - I of Rs. 40 crores)
and 26.09.2018 (for Term Loan - II of Rs.30 crores). An Indenture
of Mortgage was subsequently executed on 04.09.2020 in favour
of the Original Lender to secure repayment of the said loans.
There was delay in repayment of the loan instalments and the
Corporate Debtor made its last payment on 30.09.2021, after
which the loan accounts were classified as Non-Performing
Assets (NPA) on 30.12.2021.
4.2. On 09.05.2022, the Original Lender executed an Assignment
Agreement transferring all its rights, title, and interest in the said
loan to Edelweiss Asset Reconstruction Company Ltd.6 (Financial
Creditor). Following the same, the Financial Creditor issued a
recall and invocation of guarantee notice dated 31.05.2022,
demanding a sum of Rs. 53,03,18,487/- from the Corporate
Debtor and its personal guarantors against Term Loans I and
II. They also initiated recovery proceedings by filing of O.A. No.
367 of 2022 before the Debts Recovery Tribunal, Ahmedabad,
and issued a demand notice dated 21.07.2022 under Section
13(2) of the SARFAESI Act, 2002 for Rs. 57,24,96,064/- as on
30.06.2022.
4.3. Pursuant to commercial discussions, the Corporate Debtor and
the Financial Debtor entered into a Restructuring - cum - One
Time Settlement Agreement on 23.05.2023, under which the
Corporate Debtor agreed to discharge its outstanding liability
of Rs. 55 crores in a phased manner. The Corporate Debtor
made payment of Rs. 5.5 crores towards the first instalment
on 30.06.2023. The Corporate Debtor vide communication
dated 25.09.2023, requested the Financial Creditor to issue
a provisional No Objection Certificate to facilitate the sale of
unsold secured units in the project. However, the Financial
Creditor declined to issue NOC and subsequently revoked
the restructuring arrangement on 29.12.2023 citing default in
payment of instalments.
6
For short, "EARCL"
[2026] 1 S.C.R.
857
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
4.4. Thereafter, the EARCL - Financial Creditor filed a petition under
Section 7 of the IBC before the NCLT, seeking initiation of the
CIRP against the Corporate Debtor. During pendency of the
said proceedings, the Financial Creditor issued a sale notice
dated 10.04.2024 under Rule 8(6) read with Rule 9(1) of the
Security Interest (Enforcement) Rules, 20027 and the notice
was published in newspapers on 18.05.2024.
4.5. By a detailed and reasoned order dated 06.11.2024, the NCLT
dismissed the Section 7 petition, holding that the facts of the
case did not warrant initiation of the CIRP as the IBC was being
invoked as a recovery mechanism rather than as a tool for
insolvency resolution. The NCLT further noted that the project
was viable and substantially complete, and that insolvency
proceedings would adversely affect the interests of homebuyers
and other stakeholders.
4.6. Challenging the order of the NCLT, the Financial Creditor
preferred Company Appeal (AT)(Ins.) No. 2261 of 2024 before
the NCLAT. The Society filed an intervention application under
Rule 11 of the NCLAT Rules, 2016, on the ground that the
outcome of the appeal would directly affect the proprietary and
contractual rights of its members.
4.7. The NCLAT, by its judgment dated 01.07.2025, allowed the
appeal filed by the Financial Creditor, set aside the order of
the NCLT, and directed admission of the Section 7 petition,
thereby initiating CIRP against the Corporate Debtor. The
NCLAT, however, rejected the intervention application, holding
that the Society lacked locus standi as it was not a party to the
financial transaction forming the subject matter of the appeal.
4.8. Aggrieved thereby, the Society as well as the Corporate Debtor
have preferred the present Civil Appeals independently.
Contentions of the Parties
5.
The learned senior counsel for the appellant in C.A. No. 10261 of
2025 - Society at the outset, submitted that the impugned judgment
7
For short, "Securitisation Rules"
858
[2026] 1 S.C.R.
Supreme Court Reports
suffers from procedural impropriety and has been passed in undue
haste, without affording a fair and reasonable opportunity of hearing
to the appellant.
5.1.
It was submitted by the learned senior counsel that
the appellant Society is a registered co-operative body
representing more than 189 confirmed unit holders of the
real estate project "Takshashila Elegna", developed by the
Corporate Debtor. The rights and interests of its members are
directly and substantially affected by the outcome of the appeal
arising under Section 7 of the IBC. The Society's intervention
application was based on its status as a collective body of
homebuyers, who are recognised as "financial creditors" under
Explanation (i) to Section 5(8)(f) of the IBC, as affirmed by
this Court in Pioneer Urban Land and Infrastructure Ltd v.
Union of India8 which held that allottees in a real estate
project are to be treated as financial creditors and are entitled
to participate in the CIRP.
5.2.
The learned senior counsel further submitted that the
appellant is neither a stranger nor an intermeddler, but a
directly interested stakeholder whose members' proprietary
and contractual rights stand imperilled by the initiation of the
CIRP of the corporate debtor. However, the NCLAT erred in
holding that the appellant had no locus standi to intervene on
the ground that it was not a party to the underlying financial
transaction.
5.3.
It was further contended by the learned senior counsel that
the NCLAT misdirected itself in treating the appellant as an
"unrelated third party" merely because its members belong to
a completed tower of the same project. The creation of such
an artificial distinction between unit holders of completed and
uncompleted towers within a single real estate development
is arbitrary, lacks intelligible differentia, and bears no rational
nexus to the object sought to be achieved. Such subclassification within a homogeneous class of allotees offends
Article 14 of the Constitution of India.
8
(2019) 8 SCC 416
[2026] 1 S.C.R.
859
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
5.4.
The learned senior counsel pointed out that upon
commencement of CIRP, the contractual right of allottees to
seek specific performance of their agreements to sell stands
extinguished by virtue of Regulation 4E of IBBI (Insolvency
Resolution Process for Corporate Persons) Regulations,
20169, which mandates that any registration or possession
of units shall be subject to the approval of the Committee
of Creditors (CoC). The NCLAT failed to take this statutory
consequence into account.
5.5.
It was emphasised by the learned senior counsel that
initiation of CIRP suspends the operation of the Real Estate
(Regulation and Development) Act, 2016 (RERA), thereby
depriving homebuyers of their statutory remedies under RERA.
Simultaneously, their participation before the CoC remains
uncertain and disproportionately weak owing to their limited
voting share as unsecured financial creditors.
5.6.
Reliance was placed on Chitra Sharma v. Union of India10,
wherein this Court underscored the need to afford special
protection to the interests of homebuyers in real estate
insolvencies. Denying the appellant a hearing in such
circumstances constitutes a violation of the principle of audi
alteram partem and results in a grave miscarriage of justice.
5.7.
It was further urged by the learned senior counsel that the
NCLAT failed to exercise its inherent powers under Rule 11
of the NCLAT Rules, 2016, which empower it to pass such
orders as may be necessary to meet the ends of justice. The
rejection of the intervention application was mechanical and
devoid of due consideration of the equities involved, thereby
defeating the participatory and transparent process envisaged
under the IBC.
5.8.
The learned senior counsel also pointed out that the
intervention application was neither properly registered
nor reflected in the cause title of the impugned judgment,
evidencing procedural irregularity and lack of due process.
9
For short, "CIRP Regulations"
10
(2018) 18 SCC 575
860
[2026] 1 S.C.R.
Supreme Court Reports
The omission to adjudicate upon the same in a reasoned
manner renders the impugned judgment unsustainable in law.
5.9.
It was next submitted that the initiation of CIRP in real estate
cases often extends far beyond statutory timelines, leaving
homebuyers in prolonged uncertainty. During this period,
allottees continue to pay EMIs on their home loans without
possession of their units, causing serious financial hardship.
5.10. The learned senior counsel contended that exclusion of the
appellant from the appellate proceedings causes procedural
unfairness and violates Article 14 by denying similarly placed
financial creditors the opportunity to be heard. The question
of intervention is not merely procedural but concerns the
substantive rights of the allottees, who risk losing their
proprietary interest and right to possession in the event of
liquidation under Section 53 of the IBC.
5.11. It was further submitted by the learned senior counsel that
the participation of the appellant would not have prejudiced
the appellate proceedings. On the contrary, it would have
advanced the cause of justice by ensuring that all affected
stakeholders are heard before any order impacting their
rights is passed. The rejection of the appellant's intervention
application, therefore, results in manifest injustice and warrants
interference by this Court under Section 62 of the IBC.
5.12. The learned senior counsel submitted that the conduct of
the financial creditor in simultaneously pursing CIRP, while
also attempting to sell units and recover amounts under the
Securitisation Rules, is clearly mala fide and squarely attracts
Section 65 of the IBC. In this regard, reliance was placed on the
judgment of this Court in Innoventive Industries Ltd v. ICICI
Bank11, wherein it was held that once an order of admission
is passed, the CIRP commences and the moratorium comes
into effect, thereby imposing a freeze on, inter alia, the sale
or alienation of assets.
5.13. It was further submitted by the learned senior counsel that
in Swiss Ribbons (P) Ltd. v. Union of India12, this Court
11
(2018) 1 SCC 407
12
(2019) 4 SCC 17
[2026] 1 S.C.R.
861
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
underlined the defining qualities of a financial creditor, who
is required to have the long-term interests of the Corporate
Debtor at heart and not be merely interested in quick recovery
regardless of the future of the Corporate Debtor. Whereas, in
the present case, the Respondent - Financial Creditor, being
in the business of acquiring debts and instituting Section 7
proceedings on the strength of such debts, is purely in the
business of recovery, at the cost of the real estate project as
a whole. They have shown no regard for the interest of the
other financial creditors, who are deeply invested in the project,
having sunk their hard-earned savings into the purchase of
flats in the real estate project. According to the learned senior
counsel, the project is 90% complete. However, the Financial
Creditor is intent upon taking the Corporate Debtor into CIRP,
thereby creating a situation of instability and uncertainty, apart
from bringing the project to a standstill and depleting the value
of the units, both sold and unsold. Such conduct, far from
protecting the interests of the corporate debtor imperils them.
5.14. In light of the foregoing, it was submitted by the learned senior
counsel that the impugned judgment rejecting the appellant's
intervention application is arbitrary, procedurally irregular, and
violative of Articles 14 and 21 of the Constitution, as well as the
principles of natural justice and the same therefore, deserves
to be set aside, and the appellant ought to be permitted to
intervene in the proceedings initiated against the Corporate
Debtor to safeguard the legitimate interests of homebuyers,
who are the end users of the project "Takshashila Elegna".
6.
Continuing further, the learned senior counsel for the appellant in
C.A. No. 10012 of 2025 - Takshashila Heights India Private Limited
submitted that the NCLAT has mechanically applied Section 7(5)(a) of
the IBC without considering the bona fide commercial viability of the
project, the recovery-oriented conduct of the respondent - Financial
Creditor, and the grave prejudice caused to hundreds of homebuyers
whose interests the IBC is designed to safeguard.
6.1. According to the learned senior counsel, the appellant is a real
estate developer engaged in the construction of a residential -
cum - commercial project titled "Takshashila Elegna" situated at
Ahmedabad, Gujarat, comprising four towers and 279 units (259
862
[2026] 1 S.C.R.
Supreme Court Reports
residential + 20 commercial). The project is duly registered under
Gujarat RERA and has achieved substantial completion, with
Building Use Certificates issued by the Ahmedabad Municipal
Corporation for all towers. Out of 279 units, 189 have been
sold, 80 allottees have taken possession, and an amount of Rs.
103 crores has been realised from homebuyers. The remaining
unsold inventory constitutes a ready and monetizable asset pool
sufficient to discharge all outstanding liabilities. To finance the
project, the corporate debtor availed two term loans aggregating
to Rs. 70 crores from ECL Finance Limited on 19.07.2018,
secured by mortgage of project assets and personal guarantees.
Due to Covid-19 disruptions and delays in statutory approvals,
repayment timelines were adversely affected, and the accounts
were classified as NPA on 30.12.2021. Subsequently, on
31.12.2021 (as amended on 09.05.2022), ECL Finance assigned
the debt to EARCL, acting as Trustee of EARC Trust SC 444.
EARCL issued a recall notice dated 31.05.2022 demanding Rs.
53.03 crores, followed by a SARFAESI notice dated 21.07.2022
for Rs. 57.24 crores and filed OA No. 367 of 2022 before the
DRT, Ahmedabad - clearly reflecting a recovery driven approach.
6.2. The learned senior counsel further submitted that after
negotiations, the parties entered into a Restructuring - cum -
One Time Settlement (OTS) on 23.05.2023, fixing the liability at
Rs. 55 crores (Rs. 39 crores by the corporate debtor and Rs. 16
crores by Raghav Conpro LLP), payable in eight instalments.
The OTS obligated EARCL to issue provisional NOCs for sale
of secured units to enable repayment. The corporate debtor
paid Rs. 5.5 crores towards the first instalment and Rs. 0.86
crores towards the second. However, EARCL refused to issue
NOCs, thereby obstructing monetisation of unsold units and
directly preventing further payments. Despite being in breach
of its own obligation, EARCL unilaterally revoked the OTS on
29.12.2023 alleging default. This default, being the result of
EARCL's own non-performance, is a manufactured and selfinduced default. Thereafter, EARCL filed a Section 7 petition
on 23.02.2024 claiming Rs. 93.54 crores (as on 31.01.2024) -
an inflated figure nearly Rs. 40 crores higher than the OTS
amount, primarily due to arbitrary penal interest. Simultaneously,
EARCL pursued the proceedings under the SARFAESI Act
[2026] 1 S.C.R.
863
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
through a sale notice dated 10.04.2024 and a public notice
dated 18.05.2024, amounting to forum shopping and parallel
recovery in contravention of the IBC framework.
6.3. The learned senior counsel submitted that the NCLT after
detailed consideration, dismissed the Section 7 petition holding
that (a)the project was substantially complete; (b)initiation of
CIRP would gravely prejudice homebuyers; and (c)EARCL's
actions amounted to abuse of the IBC for recovery. The NCLAT,
however, reversed the order solely on the ground that "proof of
debt and default" was sufficient for admission and that Vidarbha
Industries Power Ltd v. Axis Bank Ltd13 was inapplicable.
Such a conclusion ignores the discretionary nature of Section
7(5)(a) and is contrary to settled law.
6.4. The learned senior counsel submitted that the sequence of
actions - recall notice, SARFAESI proceedings, DRT filing, OTS,
revocation, and Section 7 filing - demonstrates that EARCL
has invoked every recovery mechanism, treating the IBC as
an additional coercive tool. In Swiss Ribbons, this Court held
that the IBC is a beneficial legislation aimed at revival of the
corporate debtor and not a mere debt recovery instrument. In
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd.14
adopting the UNCITRAL Legislative Guide, it was recognised
that insolvency proceedings may be denied where their purpose
is improper or coercive. Recently, in GLAS Trust Co. LLC v.
BYJU Raveendran15, this Court reaffirmed that IBC must not be
misused by individual creditors as a tool for coercion or recovery,
especially where the corporate debtor is viable and operation.
EARCL, being an Asset Reconstruction Company, inherently
seeks debt recovery. While such a pursuit is permissible under
SARFAESI Act, it cannot justify recourse to IBC when the project
is commercially viable, substantially complete, and capable of
generating sufficient cash flow.
6.5. It was also submitted by the learned senior counsel that
EARCL's own records disclose inconsistent and inflated demand
13
(2022) 8 SCC 352
14
(2018) 1 SCC 353
15
2024 INSC 811 : (2025) 3 SCC 625
864
[2026] 1 S.C.R.
Supreme Court Reports
figures. The demand escalation of nearly Rs. 40 crores within
18 months, driven by penal interest and arbitrary charges, is
commercially unreasonable and evidences mala fide intent to
create a façade of default.
6.6. It was also pointed out that this Court in Vidarbha Industries
held that the Adjudicating Authority "may" admit a petition under
Section 7, thereby conferring discretion to assess the expedience
and necessity of CIRP based on the corporate debtor's financial
position and overall circumstances. The NCLT rightly exercised
such discretion, noting that the project was substantially
complete, receivables were assured, and CIRP would harm
homebuyers. The NCLAT erred in reducing the process to a
mechanical admission test, disregarding Vidarbha Industries,
which remains binding and unaltered in law. Discretion under
Section 7(5)(a) serves as a vital safeguard against abuse of
process, ensuring that viable enterprises are not forced into
insolvency due to tactical defaults or recovery motives.
6.7. It was submitted by the learned senior counsel that the
appellant's project is substantially complete with 189 units sold
and 80 possessions delivered. Admission of CIRP would freeze
conveyances and registrations, suspend ongoing possession
and maintenance, deprive homebuyers of their contractual
and statutory rights under RERA, and destroy the viability of a
function project. Such outcomes defeat the IBC's twin objectives
of value maximisation and continuation of viable enterprises.
As recognised in Chitra Sharma, the rights of homebuyers
warrant special protection in real estate insolvencies. The
Gujarat High Court in State Bank of India v. Hubtown Bus
Terminal (Vadodara) Pvt. Ltd.16 similarly recognized that
settlement through sale of inventory and escrow appropriation
is a legitimate alternative to CIRP, aligning with the IBC's
revival- oriented scheme.
6.8. It was submitted by the learned senior counsel that the corporate
debtor has already proposed a renewed repayment plan and
sought a meeting with EARCL vide email dated 13.08.2025,
indicating continued willingness to repay. If EARCL issues the
16
R/LPA No. 1 of 2022 in R/Special Civil Application No. 10985 of 2021 etc cases dated 18.10.2022
[2026] 1 S.C.R.
865
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
required NOC and facilities sales of unsold units, the entire
outstanding liability can be liquidated without recourse to CIRP.
6.9. Therefore, it was submitted by the learned senior counsel that
the Section 7 petition filed by EARCL constitutes a misuse of the
IBC for coercive recovery. The alleged default is manufactured,
the project is viable and substantially complete, and there
exists sufficient receivable to discharge all dues. The NCLT
correctly exercised discretion under Section 7(5)(a) in dismissing
the petition. The NCLAT, in reversing it without considering
expedience, viability, or stakeholder impact, committed an error
apparent on the face of record. Therefore, the learned senior
counsel prayed that this court may be pleased to allow the
appeal, set aside the impugned judgment of the NCLAT dated
01.07.2025, and restore the reasoned order of the NCLT dated
06.11.2024 dismissing the Section 7 petition.
7.
The learned senior counsel appearing on behalf of Respondent
No.1, EARCL - Financial Creditor made the following submissions:
Lack of locus standi of the appellant Society
(i)
The appellant is merely a maintenance society constituted for
upkeep and administration of the project premises and not a
representative body formed by allottees for protection of their
collective interests. Consequently, it cannot be regarded either
as a "financial creditor" under Section 5(7) or as an "operational
creditor" under Section 5(20) of the IBC. It therefore lacks locus
standi to intervene in or object to proceedings under Section
7 of the Code.
(ii)
The appellant is not a party to any loan agreements, debenture
subscription agreements, or restructuring arrangements
executed between Respondent No. 1 and the Corporate Debtor.
Any grievance on behalf of homebuyers could only have been
raised through a duly recognized association or by a sufficient
number of allottees jointly, and before the Adjudicating Authority
(NCLT) not belatedly before the NCLAT in appeal.
(iii) The appeal itself suffers from procedural infirmities: the Appellant
failed to annex its registration certificate; the supporting affidavit
is sworn by one Mr. Vishal Parmar, who is neither an allottee
866
[2026] 1 S.C.R.
Supreme Court Reports
nor a unit holder; and no resolution or collective authorization
from the allottees empowering him to act on their behalf has
been produced.
Necessity and urgency of admitting the Corporate Debtor into CIRP
(i)
The Corporate Debtor's liability is not confined to Respondent No.
1 alone. Multiple creditors, including IDBI Trusteeship Services
Ltd., have independently initiated proceedings under Section
7 (Company Petition (IB) No, 190/AHM / 2025), establishing
persistent defaults across creditors. This demonstrates systemic
financial stress and underscores the necessity of admitting
CIRP to preserve value, prevent asset dissipation, and ensure
equitable treatment of all stakeholders.
(ii)
In E.S. Krishnamurthy v. Bharath Hi- Tech Builders Pvt.
Ltd17, this Court reiterated that the enquiry under Section 7
of the IBC is confined to the existence of a financial debt and
the occurrence of default. Once these twin conditions are
established, admission of the petition is mandatory.
(iii) Reliance on Vidarbha Industries is wholly misplaced. In M.
Suresh Kumar Reddy v. Canara Bank and others18, this
Court clarified that Vidarbha Industries turned on its peculiar
facts and does not dilute or override the binding principles laid
down in Innoventive Industries and E.S. Krishnamurthy.
Any interpretation of Vidarbha Industries as conferring broad
discretion upon the Adjudicating Authority to refuse admission
despite an undisputed debt and default would defeat the scheme
and objective of the IBC.
(iv) The IBC framework incorporates comprehensive safeguards
to protect homebuyers' interests. Homebuyers are statutorily
recognized as financial creditors and are represented in
the Committee of Creditors (CoC) through an Authorised
Representative under Section 21(6A) read with Regulation 16A
of the CIRP Regulations.
(v)
Regulation 4E of the CIRP Regulations pertains to postadmission procedures and cannot be invoked to resist initiation
17
(2022) 3 SCC 161
18
2023 SCC OnLine SC 608
[2026] 1 S.C.R.
867
Elegna Co-op. Housing and Commercial Society Ltd. v.
Edelweiss Asset Reconstruction Company Limited & Anr.
of CIRP. It casts mandatory obligations on the Resolution
Professional, upon CoC approval, to deliver possession and
facilitate registration of units. This provision strengthens, rather
than restricts, the protection available to homebuyers.
(vi) Even in liquidation, allottees in possession remain protected,
as such units are expressly excluded from the liquidation
estate under Regulation 46A of the IBBI (Liquidation Process)
Regulations, 2016. Further, Pioneer Urban Land affirms the
harmonious coexistence of homebuyers' rights under RERA
with the IBC framework.
(vii) Admission of CIRP does not extinguish the contractual or
proprietary rights of allottees. On the contrary, it facilitates project
completion, enables infusion of new capital, and maximises
value for all stakeholders. Several real estate insolvency cases
demonstrate that CIRP has expedited delivery of possession and
improved project viability as compared to fragmented individual
enforcement or recovery proceedings.
(viii) The corporate debtor defaulted on the very second instalment,
paying only Rs.86 lakhs against the agreed Rs. 3 crores. Despite
repeated reminders and a contractual cure period, it failed to
rectify the default. Extensive email correspondence evidences
repeated indulgence by the financial creditor and sustained
non-compliance by the corporate debtor. Consequently, the
Respondent lawfully revoked the restructuring arrangement
and recalled the outstanding liability on 29.12.2023.
(ix) Initiation or continuation of recovery proceedings prior to
admission of CIRP is legally permissible and does not bar
initiation of insolvency proceedings under section 7. The NCLAT
has consistently held that pendency of recovery proceedings
before the DRT or enforcement under the SARFAESI Act does
not preclude a financial creditor from invoking the IBC.
With these submissions, the learned senior counsel prayed for
dismissal of the appeals by affirming the judgment of the NCLAT.
Analysis
8.
We have considered the submissions made by the learned counsel
appearing for the parties and perusal of the materials available on
record carefully and meticulously.
868
[2026] 1 S.C.R.
Supreme Court Reports
9.
By order dated 06.08.2025, this Court stayed the operation of
the impugned judgment and order passed by the NCLAT till the
pronouncement of the judgment, and further directed all parties
to maintain status quo with regard to the nature, character and
possession of the property.
10. This Court has, time and again, been called upon to protect the
rights of homebuyers navigating the turbulent waters of India's real
estate sector. Conscious of its constitutional and statutory duty, this
Court has made sustained efforts, within the four corners of the law,
to safeguard the legitimate interests of homebuyers.
10.1. In theory, the Insolvency and Bankruptcy Code, 2016 presents
an effective solution to their woes: a distressed project is
rescued through the corporate insolvency resolution process,
construction is completed, and the allotted units are ultimately
delivered. On paper, the framework appears straightforward. In
practice, however, homebuyers are often gripped with anxiety
when a project enters CIRP.