Catalyst Trusteeship Ltd vs Ecstasy Realty Pvt. Ltd

Reportable 2026 INSC 186 IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7424 OF 2025

CATALYST TRUSTEESHIP LTD. … Appellant

versus

ECSTASY REALTY PVT. LTD. … Respondent

JUDGMENT

SANJAY KUMAR, J

1. Refusal to initiate corporate insolvency resolution process under

Section 7 of the Insolvency and Bankruptcy Code, 20161, against Ecstasy

Realty Pvt. Ltd., the respondent, is in issue. CP (IB) 922/MB/C-I/2022 filed

in that regard by Catalyst Trusteeship Ltd. (hereinafter, referred to as ‘the

debenture trustee’) was dismissed by the National Company Law

Tribunal, Mumbai Bench-I (‘NCLT’), vide order dated 03.02.2023. The

same stood confirmed in appeal by the National Company Law Appellate

Tribunal, Principal Bench, New Delhi (‘NCLAT’), vide judgment dated

16.04.2025 passed in the debenture trustee’s Company Appeal (AT)

(Insolvency) No. 467 of 2023. Aggrieved thereby, the debenture trustee is

in appeal before this Court under Section 62 of the Code. Signature Not Verified Digitally signed by SACHIN KUMAR SRIVASTAVA Date: 2026.02.24 17:44:37 IST Reason:

1 For short, ‘the Code’

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2. The respondent company proposed to erect a residential-cum-retail

project in Mumbai and to meet its requirement of funds in that regard, it

proposed to issue 850 redeemable non-convertible debentures of the

value of ₹850 crore in two series, viz., Series A and Series B. The

resolution in this regard was passed by the Board of Directors of the

respondent company on 20.03.2018. On the same day, the debenture

trustee was appointed on behalf of the debenture holders. A Debenture

Trust Deed (DTD) was executed between the debenture trustee, the

respondent company and Shobhit J. Rajan, the mortgage provider, on

27.03.2018. Series A debentures to the tune of ₹600 crore were fully

subscribed by the debenture holders and the entire amount was disbursed

to the respondent company on 28/29.03.2018. ECL Finance Limited

(ECLF), Edelweiss Finvest Pvt. Ltd., Barbelo Estates LLP, an entity of the

Edelweiss group, and other directors/associates held these debentures.

Series B debentures, amounting to ₹250 crore, never came to be issued.

3. While so, on 16.03.2022, the respondent company addressed an

e-mail to ECLF proposing the restructuring of the loan repayment under

the debentures, requesting for principal and interest moratorium of 18

months in respect of the balance debentures apart from other relaxations,

including release of the Bandra property, mortgaged by its sister concern,

Variegate Real Estate Pvt. Ltd., and release of ₹25 crore, so as to continue

with the documentation process for the Sapphire (Blackrock) transaction. 2 On 23.03.2022, ECLF informed the respondent company that, subject to

completion of the Sapphire transaction by 25.03.2022, it was agreeable to

providing restructuring along with principal and interest moratorium of 18

months for the balance debentures and for release of the Bandra property

from the security package. On 29.03.2022, by way of an e-mail, the

respondent company assured ECLF about completion of the Sapphire

transaction and sought confirmation of the restructuring proposal. It also

stated that it was awaiting a NOC from the debenture trustee and that the

same was required urgently. On 30.03.2022, ECLF replied by e-mail,

informing the respondent company that it was agreeable to provide

extension but would need to run the entire process internally based on the

overall resolution plan and the final restructuring approval would be

provided around the month of June, 2022. Reference was also made to

issuance of a NOC by the debenture trustee and the respondent company

was informed that if it had any issues with the date of the said certificate,

it could reach out to the debenture trustee, which would do the needful.

4. In this regard, we may note that the respondent company addressed

letter dated 23.03.2022 to the debenture trustee seeking its NOC to avail

funding from India Credit Investment Fund to the tune of ₹152 crore,

through non-convertible debentures, against a charge on 18 unsold flats

in Phase I of the project along with the receivables of sold flats,

aggregating to ₹4.42 crore, and requested for issuance of a NOC and for 3 release of the charge on the 18 unsold flats and receivables of ₹4.42 crore

at the earliest. Notably, there was no mention of the restructuring proposal

under discussion between the respondent company and ECLF in this

letter. In turn, the debenture trustee addressed letter dated 28.03.2022 to

the respondent company, wherein it stated that it had no objection to the

issuance of non-convertible debentures of ₹152 crore by the respondent

company and creation of a charge over the 18 unsold flats and the

receivables of ₹4.42 crore. It was further stated that upon receipt of ₹152

crore from the respondent company in the escrow account, the debenture

trustee would immediately release the charge over the said property.

Significantly, there was no mention in this letter also of the restructuring

proposal or of the debenture trustee even being aware of it. On the other

hand, on 28.04.2022, the debenture trustee addressed a demand letter to

the respondent company, stating that ₹65,49,72,125/- was overdue on the

debentures as on 15.04.2022 and asking for payment.

5. It appears that it was only thereafter that the debenture trustee was

brought into the picture apropos the restructuring proposal. Pertinently,

none of the earlier e-mails exchanged between ECLF and the respondent

company were marked to or shared with the debenture trustee. By its

letter dated 29.04.2022 addressed to the respondent company, the

debenture trustee stated that, with reference to the respondent company’s

e-mail dated 29.03.2022 sent to one of the majority debenture holders in 4 relation to restructuring of the debentures and their response e-mail dated

30.03.2022, the said e-mails had been forwarded to it for its record and

necessary action and, acting as the trustee for the benefit of the debenture

holders, the debenture trustee requested the respondent company to

provide the information/data and documents enumerated therein so that

the same could be placed before the debenture holders for their internal

processing and approval. The debenture trustee further stated that, till the

restructuring was formally approved by the debenture holders, any

payment shortfall would be an event of default. The debenture trustee

followed up with letter dated 17.05.2022, referring to its earlier letter dated

28.04.2022 and calling upon the respondent company to pay the overdue

amount of ₹65,49,72,125/- at the earliest.

6. By its reply dated 19.05.2022, the respondent company stated that

it had provided all data to ‘Edelweiss’ and advised the debenture trustee

to collect the data from it. Having stated so, it offered to send the

documents, without prejudice. It referred to its correspondence with

‘Edelweiss’ and claimed that no payment was due from it till September,

2023. The debenture trustee thereupon informed the debenture holders

on 06/08.06.2022 about the respondent company’s restructuring proposal

and sought their approval. Thereafter, on 10.06.2022, the debenture

trustee informed the respondent company that the restructuring proposal

had been rejected by 94.84% of the debenture holders.

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7. On 21.07.2022, the debenture trustee issued a loan recall notice,

requiring the respondent company to pay the entire dues with interest

thereon, amounting to ₹1203,55,50,671.11. The respondent company, in

turn, issued a reply though its lawyers on 29.06.2022, stating that it was

filing a commercial suit along with an interim application. The debenture

trustee filed an application under Section 7 of the Code on 25.08.2022

seeking initiation of insolvency process against the respondent company.

The said application came to be dismissed by the NCLT on 03.02.2023.

The same stood confirmed by the NCLAT on 16.04.2025, leading to the

filing of the present appeal.

8. Perusal of the order passed by the NCLT reflects that the NCLT

proceeded on the premise that a moratorium was already in place

pursuant to the negotiations between the respondent company and one

of the debenture holders. Observing that insolvency proceedings were not

in the nature of recovery proceedings, the NCLT dismissed the company

petition. In appeal before the NCLAT, it was specifically contended on

behalf of the debenture trustee that, in terms of clause 4.4 of the DTD, the

respondent company was required to maintain an interest payment

reserve account in escrow with the bank and was liable to pay interest to

the debenture holders, compounded quarterly. As the respondent

company had failed to do so, the debenture trustee issued recall notice

dated 21.07.2022 to the respondent company, demanding repayment of 6 the principal amount along with interest, amounting to ₹1,203.55 crore. It

was pointed out that the understanding of the NCLT that a moratorium

was in place was erroneous as the argument in that regard was based on

the discussions held by the respondent company with only one of the

debenture holders and there was no modification of the DTD in

accordance with the procedure prescribed therein. It was pointed out that

the said debenture holder, ECLF, could not have acted on behalf of the

other debenture holders.

9. However, the NCLAT paced reliance on the letter dated 28.03.2022

addressed by the debenture trustee to the respondent company and held

against it, by inferring therefrom that it was aware of the restructuring

proposal. However, we do not find it to be so, as already indicated

hereinabove. The debenture trustee had only stated therein that it had no

objection to the respondent company availing further funding by issuing

non-convertible debentures and assured that, upon receipt of ₹152 crore

from the respondent company in the escrow account, it would immediately

release the charge over 18 unsold flats and the receivables of ₹4.42 crore.

This letter was with regard to the release of that property to enable the

respondent company to avail further funding and had nothing to do with

its restructuring proposal. Absence of any mention in this letter of the

restructuring proposal put forth by the respondent company to ECLF

speaks for itself. The letter was in aid of the respondent company keeping 7 itself safe from being branded a non-performing asset, as it was already

in default, and nothing more.

10. As regards the release of a sum of ₹9.33 crore to the respondent

company by the debenture trustee, which was another factor that had

weighed with the NCLT, the specific contention of the debenture trustee

was that this amount had been released towards project expenses upon

instructions from the debenture holders, following the request received

from the respondent company. The debenture trustee, therefore, asserted

that this was not a fresh disbursal and could not be looked upon as integral

to the so-called restructuring proposal. We may note that it was the

specific case of the debenture trustee that ₹5 crore was disbursed from

the Sapphire transaction escrow account while ₹4.33 crore was released

from the DTD escrow, perhaps towards the receivables for the sold flats.

Both these transactions were clearly independent and had no nexus with

the restructuring proposal, which contemplated the release of ₹25 crore

and not a lesser sum.

11. In effect, the findings of the NCLAT were that the debenture trustee

was aware of the restructuring of the loan by the respondent company and

ECLF; the debenture trustee and the debenture holders, by their conduct,

agreed to implement such restructuring, whereby an 18 months

moratorium became operative and subsisted till September, 2023, thereby

negating the default claim of the debenture trustee; and lastly, the 8 debenture trustee and the debenture holders deliberately engineered a

default so as to coerce the respondent company.

12. In this regard, we may note the settled legal position that for

admission of an application under Section 7 of the Code, the adjudicating

authority is only required to examine and satisfy itself that a financial debt

exists and there is default in relation thereto. In this context, the

observations of this Court in Innoventive Industries Limited vs. ICICI

Bank and another 2 are of relevance and are extracted hereunder:

‘30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is “due” i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise.’

Thus, the concept of a pre-existing dispute, which may be a

stumbling block for admission of an application filed under Section 9 of

the Code by an operational creditor, has no bearing on an application filed

by a financial creditor under Section 7 of the Code.

13. Significantly, the record reflects that correspondence by the

respondent company with regard to restructuring of the loan facility under

2 (2018) 1 SCC 407

9 the debentures was with one Saahil Dugar, who was associated with

Edelweiss Alternative Asset Advisors Limited, an Edelweiss group

company. The case of the respondent company, as is evident from its

counter affidavit filed before us, was that he was acting on behalf of the

Edelweiss group/ECLF. No authorization in that regard was produced.

Thus, the restructuring proposal was addressed by the respondent

company to only one debenture holder, viz., ECLF. In the absence of

express authorization of Saahil Dugar to act on behalf of the other

debenture holders, which include a company, an LLP and individuals, his

actions could not bind them. Though the respondent company claims that

ECLF acted for the Edelweiss group, the fact remains that the other group

company and the LLP, legal entities in their own right, held debentures

separately. Therefore, the mere assertion that ECLF acted on behalf of

the others has no merit in the absence of express authorization being

given by them to do so. The bald statement by the respondent company

that the subsidiaries had no independent volition of their own, therefore,

cannot be accepted. Thus, they can neither be alleged to have committed

a volte face nor can they be said to have approbated and reprobated by

their conduct. Further, the other debenture holders and the debenture

trustee were never taken into confidence at that stage.

14. In this regard, the terms of the DTD assume significance. Clause 33

of the DTD is titled ‘Modifications to these presents’. As per clause 33.1, 10 the terms of the DTD could not be amended without the prior written

consent of the debenture trustee and the debenture holders, through

‘approved instructions’. The phrase ‘approved instructions’ is defined in

clause 1.1 of the DTD to mean the instructions of the debenture holders

to the debenture trustee, which have been approved pursuant to the

provisions set out in Schedule 2, titled ‘Provisions for the Meetings of the

Debenture Holders’. Clause 22 in Schedule 2 provides that a meeting of

the debenture holders shall, inter alia, have the power, amongst others, to

sanction any compromise or arrangement proposed to be made between

the respondent company and the debenture holders. Clause 23 therein

specifically provides that the power set out in clause 22 shall be

exercisable by a resolution passed at a meeting of the debenture holders

duly convened and held in accordance with the provisions therein

contained and carried by a majority of not less than three-fourths of the

persons voting thereat upon a show of hands or if a poll is demanded by

a majority, representing not less than three-fourths in value of the votes

cast, on such poll and such a resolution is called a ‘Special Resolution’.

15. Clause 33.2 of the DTD states that the debenture trustee shall,

before taking any action on behalf of the debenture holders or providing

any consent on their behalf under any debenture document, obtain the

consent of the debenture holders as per the terms of the DTD. Clause

33.3 provides that upon obtaining such approval, the debenture trustee 11 and the respondent company shall give effect to the same by executing

all necessary deed(s). Clause 33.4 is of crucial importance and states that

no amendment, modification or termination of any provision of the DTD or

debenture documents shall be effective unless the same is in writing and

signed by or on behalf of each of the parties. Clause 37 of the DTD is titled

‘Waiver’. Clause 37.1 posits that there can be no implied waiver or

impairment while clause 37.2, titled ‘Express Waiver’, states that a waiver

or consent granted by the debenture trustee under the DTD would be

effective only if given in writing.

16. Notably, the respondent company filed Commercial Suit No. 200 of

2022, as stated in its lawyer’s reply, before the Bombay High Court

seeking a declaration that the DTD stood amended by virtue of the e-mails

dated 16.03.2022 and 23.03.2022 and for consequential reliefs. The

defendants in the said suit were the debenture trustee, ECLF, and other

members of the Edelweiss group. However, by order dated 13.09.2022, a

learned Judge of the Bombay High Court refused to grant an interim

injunction restraining the defendants from initiating any action under the

DTD and from demanding any payments thereunder. The learned Judge

held that, in the absence of modification of the terms of the DTD in

accordance with the method prescribed therein, the respondent company

could not be said to have made out a prima facie case for restraining the

defendants in the suit from exercising the rights which flowed from the 12 DTD. The learned Judge took note of the fact that there was no

compliance with clause 33 of the DTD, which required prior written

consent of the debenture holders. Unfortunately, this order by the

competent civil Court, which is stated to have attained finality, was

casually brushed aside by the NCLT and the NCLAT.

17. We may also note that clause 28 of the DTD deals with ‘release of

secured assets’ and clause 28.3 therein provides that, at all times until the

final settlement date, the respondent company shall be entitled to release

of the security interest created over the ‘additional property’, mortgaged

by Variegate Real Estate Pvt. Ltd., upon payment of ₹50 crore by the

respondent company towards redemption of the debentures. The

‘additional property’ referred to in this clause is defined in clause 1.1 as

the parcel of land of 15,138 square feet situated on Turner Road, Bandra

(W), Mumbai, to be mortgaged by Variegate Real Estate Pvt. Ltd. The final

settlement date, as defined, means the day on which the debentures are

redeemed to the satisfaction of the debenture trustee. The release of this

property assumes importance as the same was construed by the NCLT

and the NCLAT to be a factor weighing in favour of the respondent

company’s claim that its restructuring proposal had been accepted and

acted upon. However, the letter dated 29.03.2022 addressed by the

debenture trustee to Variegate Real Estate Pvt. Ltd., the respondent

company and Shobhit J. Rajan in relation to release of the Bandra 13 property from the mortgage stands on a different footing as it was relatable

to clause 28.3 of the DTD and not the respondent company’s restructuring

proposal. The release of this property seems to have taken place upon

the respondent company transferring monies towards redemption of the

debentures after receiving the additional funding of ₹152 crore.

18. In terms of the law laid down by this Court in Indus Biotech Private

Limited vs. Kotak India Venture (Offshore) Fund and others3, a

corporate debtor is entitled to establish that the financial debt is not due

and no default had occurred in that regard to defeat a financial creditor’s

application for corporate insolvency resolution process under Section 7 of

the Code. However, such an exercise cannot assume an indirect way of

raising a pre-existing dispute, which would be available only to ward off

an operational creditor’s claim under Section 9 of the Code. There is no

escaping the fact that the entire case of the respondent company is built

on the so-called restructuring of the loan facility under the DTD, but it is

an admitted fact that the procedure prescribed under the DTD for such

modification and variation of the terms thereunder was not adhered to. We

may also note that Section 62 of the Contract Act, 1872, speaks of

novation of a contract when the parties to that contract agree to substitute

a new contract for it, i.e., all the parties to such contract must be in

3 (2021) 6 SCC 436

14 consensus as to such substitution. Presently, the admitted position is that

the debenture trustee and the other debenture holders were not even privy

to the discussion as to the modification of the DTD at the relevant time, let

alone being consenting parties thereto. The question of ‘estoppel’ being

pressed into service by the respondent company against ECLF and the

other debenture holders also does not arise as any waiver of the terms

stipulated in the DTD had to be in accordance with the procedure

prescribed therein, under clause 33, i.e., by way of a written document.

Admittedly, there is no written document to support such a plea.

19. Further, the NCLAT’s inference that the respondent company was

entitled to claim a legitimate expectation that the moratorium and release

of properties would be acted upon by the debenture trustee and the other

debenture holders is equally without merit. The DTD prescribed a detailed

method for modification of the terms thereof and would not stand altered

by any such expectation based on the unilateral exchange between the

respondent company and ECLF, which did not fructify to a crystalised

commitment even on the part of ECLF. ECLF’s e-mail dated 30.03.2022

put the respondent company on notice that, though it was agreeable to

the restructuring proposal and the grant of a moratorium, it would need to

run the entire process internally based on the overall resolution process

in compliance with the terms of the DTD. Therefore, the respondent

company could not have assumed that ECLF had already agreed to the 15 restructuring proposal without further ado and that the same was binding

upon all concerned. In this regard, the observations made by the NCLAT

against ECLF are without basis as the aforestated communication from

ECLF to the respondent company demonstrates that no promise was held

out by it as to the restructuring and all that was stated was that the

proposal would be considered as per due procedure.

20. The conclusion drawn by the NCLAT as to the debenture trustee

colluding with the debenture holders does not hold water as the debenture

trustee was enjoined by the DTD to protect the interest of the debenture

holders. Even on facts, the question of collusion between them was not

made out. The NCLAT’s notion that the debenture trustee was required to

act with fairness and protect the interest of the respondent company is

contrary to the duty and obligation cast upon the debenture trustee under

the DTD, which is to protect the interests of the debenture holders. The

finding that the debenture trustee acted in unison with the debenture

holders in catalysing their dubious designs to drag the respondent

company towards insolvency is, therefore, incorrect. The adverse remarks

made against the debenture trustee are, accordingly, set aside.

21. Though, the NCLAT was persuaded to record that the respondent

company, having received ₹600 crore of the ₹850 crore under the DTD,

had already repaid ₹508.48 crore, it lost sight of the passage of time,

whereby the principal coupled with the interest due were much higher, 16 resulting in gross disparity between what was claimed by the respondent

company and the reality of the amount actually due and payable by it.

22. Ordinarily, this Court would not choose to reappreciate a matter on

facts when the jurisdictional National Company Law Tribunal and, in

appeal, the National Company Law Appellate Tribunal have recorded

concurrent findings. The exception to this self-imposed rule would be

when the perversity of such concurrent findings is clearly established. We

find the present case to be one such case, where the perversity of the

findings recorded by the NCLT and by the NCLAT is glaring and manifest,

beseeching interference by this Court at the second appellate stage.

23. We, accordingly, hold that the NCLT and the NCLAT erred in

ignoring the binding terms of the Debenture Trust Deed dated 27.03.2018

and in reframing the terms thereof on the strength of surmises,

conjectures and assumptions, which were not borne out on facts and were

completely unsustainable in law. Company Petition (IB) 922/MB/C-I/2022

filed by Catalyst Trusteeship Limited, the debenture trustee, deserved to

be admitted under Section 7 of the Code.

24. In consequence, the order dated 03.02.2023 passed by the National

Company Law Tribunal, Mumbai Bench-I, and the judgment dated

16.04.2025 passed by the National Company Law Appellate Tribunal,

Principal Bench, New Delhi, are set aside. Company Petition (IB)

922/MB/C-I/2022 is restored to the file of the National Company Law 17 Tribunal, Mumbai Bench-I, and the same shall be admitted by way of a

separate order. Necessary further steps shall be initiated thereafter as per

due procedure.

The appeal is allowed in the aforestated terms.

..............................., J.

SANJAY KUMAR

..............................., J.

K. VINOD CHANDRAN

FEBRUARY 24, 2026 NEW DELHI.

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