Reverse CIRP Can't Be Claimed As Right: NCLAT Upholds Insolvency Against Supertech Realtors
The National Company Law Appellate Tribunal (NCLAT) New Delhi upheld an admission order under section of the Insolvency and Bankruptcy Code, 2016 (IBC) against Supertech Realtors Pvt. Ltd. and dismissed an appeal filed by Ram Kishore Arora, its suspended director.
A bench comprising Justice Ashok Bhushan and Mr. Barun Mitra (Technical Member) observed that once debt and default are established, the adjudicating authority is bound to admit the application and cannot compel the lenders to enter into as settlement or accept OTS proposals.
The Tribunal held that “Reverse CIRP is a pragmatic tool evolved in limited cases, not an enforceable right. It requires lender confidence and stakeholder unanimity, both of which are lacking here".
Background:
Supertech Realtors had taken a loan of Rs. 150 crore from the Bank of Maharashtra for developing its Supernova project in Noida. The account was declared Non-Performing Assets (NPA) and the bank filed an application under section 7 of the IBC claiming a default of Rs. 168 crore. Although an OTS proposal was sanctioned which was later cancelled due to non-compliance. The company approached the High Court against rejection of the OTS proposal by filing a writ petition which came to be rejected.
Later, the decision of the High Court was also affirmed by the Supreme Court. During the Corporate Insolvency Resolution Process (CIRP), the suspended director proposed multiple OTS proposals but all of them were rejected by the lenders.
The Appellant submitted that the tribunal should allow a Reverse CIRP permitting both the promoter and co-developer to complete the project under the supervision of the IRP. Relying on Flat Buyers Association Winter Hills-77 and Anand Murti, it was submitted that in real estate insolvency, project completion should be prioritised and not liquidation. It was further submitted that rejection of the OTS proposal was arbitrary despite earlier in principle approval in 2025.
Per contra, the Respondent submitted that debt and default were never disputed and the OTS proposals were repeatedly dishonoured. The consortium with exposure of Rs. 990 crore considered the revised OTS proposal and rejected them in the Joint Lenders Meeting and communicated the decision to Supertech. The suspended director cannot bypass the CIRP mechanism and nominate his own co-developer to complete the project.
Findings:
The Tribunal observed that once debt and default are established, the NCLT is bound to accept the application under section 7 of the IBC. It held that “When debt and default are proved, the Adjudicating Authority is bound to admit the application. The reasons that persuaded the banks to not accept the OTS cannot be examined in these proceedings”.
The Tribunal perused the materials of the lenders meeting and observed that the lenders had considered the OTS proposal and disapproved after deliberation. Therefore, there was no arbitrariness or mala fides in the rejection of the proposal.Citing Essar Steel, it held that the commercial wisdom of the creditors must be respected.
The Tribunal examined in detail the doctrine of Reverse CIRP as developed in the Flat Buyers Association. It observed that although the Reverse CIRP is an accepted principle, its application depends on the facts of each case and satisfaction of pre-conditions. Reverse CIRP can be allowed when lenders consent to such measures and homebuyers are aligned in support. Both these conditions were missing in case. The financial creditors did not approve the proposal and the Supernova Apartment Owners Association had expressed objections to the proposal.
The Tribunal held that “Reverse CIRP is a pragmatic tool evolved in limited cases, not an enforceable right. It requires lender confidence and stakeholder unanimity, both of which are lacking here". The Tribunal relied on E.S. Krishnamurthy where it was held that the NCLT cannot compel creditors into settlement or act as a court of equity under section 7 of the IBC. It held that “Reasons which persuaded the Banks to not accept the OTS proposal cannot be gone into in these proceedings".
Accordingly, the NCLT's order of accepting the application under section 7 of the IBC was upheld and the CIRP was commenced against Supertech Realtors Pvt. Ltd.
Case Title: Mr. Ram Kishore Arora Director Versus Bank of Maharashtra
Case Number: Company Appeal (AT) (Insolvency) No. 1203 of 2024
Order Date: 13/08/2025