NCLAT Sets Aside Insolvency Against Mahagun India, Orders Fresh Project-Specific Review To Protect Homebuyers’ Interests
Introduction
The National Company Law Appellate Tribunal (NCLAT) has set aside the insolvency order initiated against Noida-based realty firm Mahagun (India) Pvt. Ltd., providing relief to nearly 8,000 homebuyers. The tribunal directed the National Company Law Tribunal (NCLT), New Delhi Bench to reconsider the matter afresh, emphasizing the principle of project-specific insolvency in line with Supreme Court precedents.
Factual Background
Mahagun (India) Pvt. Ltd. had raised funds worth ₹355 crores in December 2020 through secured, senior, unlisted, redeemable, transferable, non-convertible debentures (NCDs) issued for its Mahagun Manorialle Project. The NCDs were due for redemption between December 2022 and December 2025. The company allegedly defaulted on repayment on 30 September 2023, following which IDBI Trusteeship Services Ltd., acting as the debenture trustee, issued recall notices in February and April 2024. When no payment was received, IDBI filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT in January 2025.
Procedural Background
The NCLT, New Delhi, by its order dated August 2025, admitted the insolvency petition and commenced the Corporate Insolvency Resolution Process (CIRP) against Mahagun (India) Pvt. Ltd. in its entirety. A Resolution Professional (RP) was appointed; however, the order caused widespread concern among 8,000+ homebuyers and multiple lenders involved in other Mahagun projects that were not in default. Aggrieved by this blanket admission, company director Amit Jain filed an appeal before the NCLAT, contending that the default was limited to one project and not the entire enterprise.
Issues
1. Whether the default confined to Mahagun Manorialle project justified CIRP initiation against the entire company.
2. Whether insolvency proceedings in the real estate sector should be project-specific in cases involving multiple independent projects.
3. Whether the NCLT erred in not granting Mahagun adequate opportunity to present its reply and project data.
Contentions of the Parties
Appellant (Amit Jain / Mahagun India Pvt. Ltd.): The alleged default was restricted to a single project, while other projects were financially sound and under separate financial arrangements.
The NCLT failed to provide sufficient opportunity to file a detailed reply demonstrating solvency of other projects. A company-wide CIRP would adversely affect homebuyers and lenders of non-defaulting projects. Aditya Birla Capital, a lender to other projects, confirmed that no default existed in their facilities.
Respondents (IDBI Trusteeship Services Ltd., RP, and Homebuyers): The financial creditor maintained that default under the NCDs warranted initiation of CIRP under Section 7 of the IBC.
The homebuyers and RP supported a project-based CIRP, arguing that extending insolvency to all projects would harm non-defaulting stakeholders. It was urged that the NCLT should have determined the project-level scope before admitting the case.
Reasoning and Analysis
The NCLAT Bench comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) observed that the NCLT’s order suffered from a procedural lapse and lacked proper evaluation of project-specific facts. Furthermore, relying on Supreme Court decisions in Mansi Brar Fernandes and Indiabulls Asset Reconstruction Co. Ltd., the tribunal reiterated that insolvency in real estate must be restricted to the defaulting project.
The bench observed that, “The Adjudicating Authority has to consider whether the CIRP be confined to the project for which the Financial Creditor has advanced finance, or CIRP to continue encompassing all the projects of the Corporate Debtor.” The tribunal held that since the company was not given fair opportunity to file a complete reply and since multiple projects were independently financed, the matter required fresh adjudication to prevent prejudice to homebuyers and solvent projects.
Implications
This decision strengthens the legal principle of project-wise insolvency resolution in the real estate sector. It shields solvent projects and homebuyers from being unnecessarily entangled in company-wide insolvency due to defaults in other projects. Moreover, by remanding the case for reconsideration, the NCLAT reinforced that CIRP should be proportionate, equitable, and aligned with project-specific financing, ensuring a balance between creditor rights and consumer protection.
In this case the appellant was represented by Mr. Abhijeet Sinha Sr. Advocate with Mr. Gaurav Mitra, Mr. Gaurav H. Sethi, Mr. Anmol Joshi, Mr. Rahul Kapoor and Mr. Rahul Panwar, Advocates.