NCLAT Sets Aside NCLT Order on Property Attachment, Calls for Fresh Adjudication

Tribunal Finds Manifest Illegality in NCLT's Failure to Ascertain Attachment Status by Enforcement Directorate

In a significant development, the National Company Law Appellate Tribunal (NCLAT) has set aside a previous order by the National Company Law Tribunal (NCLT), Mumbai, concerning the release of a property claimed not to be attached by the Directorate of Enforcement (ED). The judgment, delivered by the Principal Bench in New Delhi, has remanded the matter back to the NCLT for fresh adjudication.

The case involves Mohan Reddy Bhumi Reddy Gari, who had appealed against the NCLT's decision to dismiss his application for the release of a flat located at Mantri Pinnacle, Bannerghatta Road, Bengaluru. This property was allegedly not included in the provisional attachment order issued by the ED on February 14, 2019. The NCLAT, comprising Justice Mohd. Faiz Alam Khan and Indevar Pandey, highlighted a manifest illegality committed by the NCLT in not properly adjudicating the attachment status of the property.

The core issue revolves around the Insolvency and Bankruptcy Code, 2016, particularly Sections 61 and 32A. The adjudicating authority had previously dismissed the appellant's request, stating that releasing the flat might not align with the interim order passed by the Supreme Court, which continued the provisional attachment order. However, the NCLAT emphasized that the adjudicating authority failed to ascertain whether the flat was actually attached by the ED, thus committing a manifest illegality.

The NCLAT's judgment is a call for the NCLT to conduct a thorough examination of whether flat no. 2402 was indeed part of the attachment order. If the property is found not to be attached, the adjudicating authority is within its jurisdiction to release it. The NCLAT noted that the Supreme Court's interim order only pertained to properties explicitly mentioned in the provisional attachment.

The appellant had argued that the flat was never included in the ED's attachment list and thus should be released. The NCLAT agreed that the NCLT should have verified this claim rather than placing the responsibility on the respondent, STCI Finance Ltd., to decide based on an undertaking from the appellant.

This judgment underscores the importance of a meticulous approach in insolvency proceedings, especially when they intersect with enforcement actions by authorities like the ED. The NCLAT has directed the parties to appear before the NCLT on December 3, 2025, and requested the adjudicating authority to resolve the matter within a month thereafter.

The case serves as a reminder of the complexities involved when insolvency and enforcement proceedings overlap, urging adjudicating authorities to ensure thorough investigation and compliance with statutory requirements.

Bottom Line:

Insolvency and Bankruptcy Code - Adjudicating Authority's duty to ascertain the attachment status of property by Directorate of Enforcement before denying its release - Manifest illegality committed by the Adjudicating Authority in failing to adjudicate properly.

Statutory provision(s): Insolvency and Bankruptcy Code, 2016 Sections 61, 32A

Mohan Reddy Bhumi Reddy Gari v. STCI Finance Limited, (NCLAT)(Principal Bench: New Delhi) : Law Finder Doc Id # 2810550