In a significant decision, NCLAT rules in favor of AKJ Metals, emphasizing that Adjudicating Authority under IBC cannot override civil court decrees and possessory rights recognized by civil courts.
In a landmark judgment, the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, has set aside the orders of the Adjudicating Authority directing AKJ Metals Private Limited to hand over possession of two properties, the Baddi and Nalagarh properties, to the Resolution Professional (RP) appointed under the Corporate Insolvency Resolution Process (CIRP) for RCI Industries and Technologies Limited. The appeals, Comp. App. (AT) (Ins) No. 1606 and 1607 of 2025, were preferred by AKJ Metals against the orders dated 09.10.2025 passed by the National Company Law Tribunal (NCLT), New Delhi.
The tribunal, comprising Justice Ashok Bhushan and Mr. Barun Mitra, emphasized that the jurisdiction of the Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 (IBC) is limited to resolving insolvency-related matters. It does not extend to modifying or overruling judicial decisions made by competent civil courts. The possessory rights of AKJ Metals, recognized through civil court decrees, including a Consent Decree, cannot be disturbed in IBC proceedings.
The case stems from transactions where AKJ Metals entered into agreements to purchase the disputed properties from the Corporate Debtor, RCI Industries, before the initiation of CIRP. The company had paid the full consideration and taken possession, though registered conveyance deeds were not executed. Civil suits for specific performance were filed, culminating in Consent Decrees recognizing AKJ Metals’ possessory rights.
Despite this, the RP filed applications under Sections 18, 23, and 25 of the IBC for possession of the properties, claiming they were assets of the Corporate Debtor. The NCLT ordered AKJ Metals to hand over possession, prompting the appeals.
NCLAT, in its judgment, underscored that the Adjudicating Authority cannot invalidate or sit in appeal over Consent Decrees. The tribunal reiterated the legal validity of Consent Decrees and stressed that the IBC is not intended to create an omnibus forum for all disputes involving the Corporate Debtor, particularly those already adjudicated by civil courts.
The tribunal also noted that the RP had filed another application under Section 66 of the IBC, alleging fraudulent transactions and seeking contributions to the Corporate Debtor's assets. NCLAT directed that status quo regarding possession be maintained until the Section 66 application is adjudicated.
This judgment is seen as a critical affirmation of the limits of the Adjudicating Authority's powers under the IBC, reinforcing the sanctity of civil court orders and protecting the possessory rights of parties recognized through legal processes.
Bottom line:-
Adjudicating Authority under IBC cannot override or nullify judicial orders passed by Civil Courts, including Consent Decrees. Possessory rights recognized by Civil Courts cannot be disturbed in summary proceedings under IBC.
Statutory provision(s):
Insolvency and Bankruptcy Code, 2016 - Sections 18, 23, 25, 61, 66; Transfer of Property Act, 1882 - Section 53A; Civil Procedure Code, 1908 - Order 23, Rule 3.
