In a significant ruling under the Insolvency and Bankruptcy Code (IBC), the Supreme Court of India has revived insolvency proceedings against Ecstasy Realty Pvt. Ltd. The Court held that the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) erred in refusing to admit a plea filed by Catalyst Trusteeship Ltd., the debenture trustee.
The Bench of Justice Sanjay Kumar and Justice K. Vinod Chandran made it clear that insolvency admission under Section 7 of the IBC depends only on proof of financial debt and default - not on informal restructuring discussions.
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Background of the Case
The dispute arose from a ₹600 crore investment made through secured, redeemable non-convertible debentures issued by Ecstasy Realty for a Mumbai real estate project. Catalyst Trusteeship Ltd. acted as the debenture trustee on behalf of investors.
When repayments allegedly fell into default, the trustee issued a recall notice and later filed an application under Section 7 of the IBC seeking initiation of the Corporate Insolvency Resolution Process (CIRP).
However, the NCLT dismissed the plea in February 2023. The NCLAT upheld that decision in April 2025, observing that restructuring discussions between the company and one debenture holder had resulted in an 18-month moratorium.
Challenging these findings, the trustee approached the Supreme Court.
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Court’s Examination of the Restructuring Claim
A key question before the Court was whether informal email exchanges between the company and one debenture holder amounted to a valid restructuring of the loan.
The Bench carefully examined the Debenture Trust Deed (DTD). It noted that any modification required written approval from the trustee and a three-fourths majority of debenture holders through a properly convened meeting.
“The procedure prescribed under the DTD for modification and variation of its terms was not adhered to,” the Bench observed.
The Court found no written amendment, no special resolution, and no formal approval. Therefore, the alleged restructuring could not override the binding terms of the original agreement.
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Role of the Debenture Trustee
The NCLAT had made adverse remarks suggesting that the trustee acted in collusion with debenture holders to push the company into insolvency.
The Supreme Court firmly rejected this reasoning. It clarified that the trustee’s duty was to protect the interests of debenture holders - not the corporate debtor.
“The adverse remarks made against the debenture trustee are… set aside,” the judgment stated.
The Court emphasized that a trustee cannot waive contractual terms unless the deed itself allows it in writing. There was no such written waiver in this case.
Legal Position Under Section 7 IBC
Relying on settled law, including Innoventive Industries Ltd. v. ICICI Bank, the Bench reiterated that while admitting a Section 7 application, the adjudicating authority only needs to determine whether:
- A financial debt exists; and
- A default has occurred.
“It is of no matter that the debt is disputed so long as the debt is ‘due’,” the Court quoted from earlier precedent.
The concept of “pre-existing dispute,” relevant in operational creditor cases under Section 9, does not apply to financial creditors under Section 7.
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Findings on NCLT and NCLAT Orders
The Supreme Court found the lower tribunals’ conclusions to be “glaring and manifest” errors. It held that both forums ignored the binding contractual terms and relied on assumptions not supported by record.
The Bench stated that this was one of those rare cases where concurrent findings deserved interference because they were perverse and legally unsustainable.
The Decision
Allowing the appeal, the Supreme Court:
- Set aside the NCLT order dated 03.02.2023
- Set aside the NCLAT judgment dated 16.04.2025
- Restored Company Petition (IB) 922/MB/C-I/2022
- Directed that the insolvency petition be admitted by a separate order
With this, the insolvency process against Ecstasy Realty Pvt. Ltd. moves forward under the IBC framework.
Case Title: Catalyst Trusteeship Ltd. v. Ecstasy Realty Pvt. Ltd.
Case No.: Civil Appeal No. 7424 of 2025
Decision Date: February 24, 2026
