The Supreme Court has held that Section 7 IBC applications must be admitted in absence of Debenture Trust Deed (DTD) compliant restructuring.

The bench of Justice Sanjay Kumar and Justice K. Vinod Chandran has observed that waiver under the DTD could only be in writing, and no such written waiver existed. Therefore, the doctrine of estoppel had no application.

Ecstasy Realty Pvt. Ltd. had proposed a residential-cum-retail project in Mumbai and resolved to issue 850 redeemable non-convertible debentures (NCDs) aggregating ₹850 crore in two series. Series A debentures worth ₹600 crore were fully subscribed and disbursed in March 2018, while Series B debentures of ₹250 crore were never issued.

A Debenture Trust Deed (DTD) was executed on March 27, 2018, appointing Catalyst Trusteeship Ltd. as the debenture trustee on behalf of the debenture holders, which included ECL Finance Ltd. (ECLF) and other entities.

In March 2022, the corporate debtor initiated discussions with ECLF seeking restructuring of repayment obligations and an 18-month moratorium on principal and interest payments. However, these discussions were not formally shared with the debenture trustee at the time.

Subsequently, upon default in interest payments, the debenture trustee issued a demand notice for overdue amounts and later a recall notice demanding repayment of over ₹1,203 crore, including interest. A Section 7 IBC application was filed on August 25, 2022.

The NCLT dismissed the application, observing that negotiations for restructuring and moratorium were underway and that insolvency proceedings could not be used as recovery mechanisms. The NCLAT upheld this view, inferring that the debenture trustee was aware of and had effectively acquiesced in the restructuring proposal.

The appellate tribunal further concluded that an 18-month moratorium had become operative and subsisted till September 2023, thereby negating the allegation of default.

The Supreme Court found the conclusions of both tribunals to be perverse and legally unsustainable.

The Court emphasized that for admission of a Section 7 application, the adjudicating authority is only required to determine: Whether a financial debt exists; and Whether there has been a default.

Relying on Innoventive Industries Ltd. v. ICICI Bank (2018) 1 SCC 407, the Court reiterated that the existence of a dispute is irrelevant in Section 7 proceedings, unlike in cases under Section 9 involving operational creditors.

The Court closely examined Clause 33 of the DTD, which required prior written consent of the debenture holders, approval through a special resolution, and execution of written modification documents signed by all parties.

It noted that the alleged restructuring was based solely on email exchanges between the corporate debtor and one debenture holder (ECLF). There was no evidence of authorization permitting ECLF to act on behalf of other debenture holders, nor was there compliance with the mandatory procedure for amendment under the DTD.

The Court held that no written modification was executed as required under Clause 33. No approved instructions or special resolution of debenture holders was obtained. No novation under Section 62 of the Indian Contract Act, 1872 could be established in the absence of consensus among all contracting parties.

The Court rejected the corporate debtor’s plea of legitimate expectation, observing that contractual terms could not be overridden by unilateral communications that did not crystallize into binding commitments.

It further held that waiver under the DTD could only be in writing, and no such written waiver existed. Therefore, the doctrine of estoppel had no application.

The Supreme Court also took note that the corporate debtor had filed a commercial suit before the Bombay High Court seeking a declaration that the DTD stood amended by virtue of the email exchanges. The High Court had refused interim relief, holding that no modification in accordance with the DTD had taken place.

The apex court observed that this order, which had attained finality, was “casually brushed aside” by the NCLT and NCLAT.

The NCLAT had made adverse observations suggesting collusion between the debenture trustee and debenture holders. The Supreme Court set aside these remarks, holding that the trustee was duty-bound under the DTD to protect the interests of debenture holders and that no material supported a finding of collusion.

While acknowledging that it ordinarily refrains from reappreciating concurrent findings of fact, the Court held that this was an exceptional case where the perversity of findings was “glaring and manifest.”

It observed that the tribunals had effectively rewritten contractual terms based on conjectures and assumptions, contrary to the express provisions of the DTD.

The Supreme Court set aside the NCLT’s order dated February 3, 2023; the NCLAT’s judgment dated April 16, 2025;

The court restored Company Petition (IB) 922/MB/C-I/2022 to the NCLT, Mumbai Bench-I.

The court directed that the Section 7 application be admitted by way of a separate order, with further steps to follow in accordance with law.

Case Details

Case Title: Catalyst Trusteeship Ltd. Versus Ecstasy Realty Pvt. Ltd. 

Citation: JURISHOUR-87-SC-2026 

Case No.: Civil Appeal No. 7424 Of 2025

Date: 24/02/2026

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