NCLAT Upholds CIRP Against Vatika Limited but Restricts Insolvency to Project ‘Aspirations’

March 27, 2026 : The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has held that once a debenture trustee successfully establishes the existence of financial debt and default, initiation of Corporate Insolvency Resolution Process (CIRP) under Section 7 of the Insolvency and Bankruptcy Code, 2016 cannot be faulted. However, the Tribunal clarified that where financing is project-specific in a real estate context, the CIRP must be confined to the concerned project and cannot extend to unrelated projects of the corporate debtor.

The ruling came in an appeal filed by Surender Singh, suspended director of Vatika Limited, challenging the order of the NCLT Chandigarh Bench which had admitted a Section 7 application filed by IDBI Trusteeship Services Limited, imposed moratorium, and appointed an Interim Resolution Professional.

Vatika Limited, engaged in real estate development across Haryana and the NCR, had executed a Debenture Trust Deed dated 30 June 2017 for issuance of secured non-convertible debentures aggregating ₹146 crore. The debentures were backed by project-specific securities including mortgage over land, assignment of receivables, and escrow arrangements tied to a particular real estate development, later identified as “Project Aspirations.”

The Tribunal noted that although the debenture tenure was extended and the principal repayment was due only on 30 June 2024, the corporate debtor had defaulted in payment of quarterly interest. A demand notice dated 29 December 2023 called for payment of ₹29.72 crore towards unpaid interest, which remained unpaid despite a cure period.

Importantly, the Appellate Tribunal held that inclusion of the entire principal amount in computing default at ₹274 crore was not justified, as the principal had not fallen due at the time of filing the Section 7 application. Nevertheless, the admitted default in interest—well above the statutory threshold—was sufficient to sustain initiation of CIRP.

On the issue of subsequent payments, the Tribunal rejected the argument that payment of ₹37.2 crore during pendency of proceedings cured the default. It reiterated that the existence of default must be assessed as on the date of filing of the application, and subsequent payments do not nullify the trigger for insolvency proceedings.

A key aspect of the ruling relates to project-wise insolvency in real estate cases. The NCLAT disagreed with the NCLT’s view that insolvency cannot be project-specific. Relying on precedents including Mansi Brar Fernandes, Flat Buyers Association Winter Hills, and Gagan Tandon, the Tribunal held that where financing and security are tied to a specific project, the CIRP should ordinarily be confined to that project to prevent prejudice to other stakeholders.

The Tribunal observed that extending CIRP to the entire corporate debtor, which had multiple independent projects, would adversely impact stakeholders and homebuyers of unrelated projects. It emphasized that real estate insolvency requires a balanced, project-centric approach.

Accordingly, while upholding the admission of the Section 7 application, the NCLAT modified the impugned order and directed that the CIRP shall be restricted solely to the project “Aspirations” and shall not extend to other projects of Vatika Limited.

Case Details:
Surender Singh v. IDBI Trusteeship Services Ltd. & Anr.
Company Appeal (AT) (Insolvency) No. 266 of 2026
Coram: Justice Ashok Bhushan (Chairperson), Barun Mitra (Technical Member)