Court Declares Civil Court Lacks Jurisdiction Over Matters Under Insolvency and Bankruptcy Code, 2016, Reinforcing NCLT’s Powers to Adjudicate Fraud and Debt Validity
In a significant judgment dated January 5, 2026, the Delhi High Court, presided over by Justice Purushaindra Kumar Kaurav, dismissed a civil suit filed by Roseland Buildtech Pvt. Ltd. that challenged the initiation of insolvency proceedings by Vihaan 43 Realty Pvt. Ltd. under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016. The Court held that the suit was barred under the provisions of the IBC, emphasizing the exclusive jurisdiction of the National Company Law Tribunal (NCLT) in adjudicating disputes related to insolvency and bankruptcy.
The suit arose after Vihaan 43 Realty Pvt. Ltd., the financial creditor, filed a petition before the NCLT for initiating the Corporate Insolvency Resolution Process (CIRP) against Roseland Buildtech Pvt. Ltd., the corporate debtor. The plaintiff contended that its loan obligations had been fully discharged and that the Business Transfer Agreement (BTA), which formed the basis for the assignment of debt and the insolvency petition, was fraudulent and void. Additionally, the plaintiff alleged forgery and collusion among the defendants and sought declaratory and injunctive reliefs in the civil court.
However, the Delhi High Court, after a detailed analysis of the legislative intent, statutory provisions, and relevant case law, concluded that such disputes fall squarely within the jurisdiction of the NCLT. The Court underscored that Sections 63 and 231 of the IBC expressly bar civil courts from entertaining suits or proceedings concerning matters on which the NCLT or the National Company Law Appellate Tribunal (NCLAT) have jurisdiction.
Significantly, the Court highlighted the powers conferred upon the NCLT under Sections 65 and 75 of the IBC to investigate allegations of fraudulent or malicious initiation of insolvency proceedings and false information furnished in applications. The Court also pointed to Section 60(5)(c), which grants the NCLT residuary jurisdiction to decide any question of law or fact arising out of or in relation to insolvency resolution or liquidation proceedings.
The judgment extensively referenced Supreme Court decisions such as Embassy Property Developments Pvt. Ltd. v. State of Karnataka and Swiss Ribbons Pvt. Ltd. v. Union of India, emphasizing the objective of the IBC to create a single, unified, and time-bound insolvency resolution framework. The Court rejected the plaintiff’s reliance on precedents related to the SARFAESI Act and SEBI Act, clarifying that the IBC’s scope and jurisdictional provisions are distinct and more comprehensive.
Further, the Court rejected the plaintiff’s argument that the civil court should entertain the suit because the right asserted pre-existed under common law, holding that a statutory scheme like the IBC overrides any such common law claims when the subject matter falls within the tribunal’s exclusive jurisdiction.
In conclusion, the Delhi High Court allowed the application filed by the defendant under Order VII Rule 11 of the Civil Procedure Code, 1908, to reject the plaint, thereby dismissing the civil suit. The Court also imposed costs of Rs. 2,00,000 on the plaintiff, directing the amount to be deposited with the Delhi State Legal Services Authority for supporting victims of offenses under the Protection of Children from Sexual Offences Act, 2012, signaling a strong stance against frivolous and forum-shopping litigation.
This judgment reinforces the centrality of the NCLT in insolvency matters and sends a clear message discouraging attempts to circumvent the statutory insolvency framework through parallel civil litigation.
Bottom Line:
Civil courts are barred from entertaining suits challenging the initiation of Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016, as such disputes fall within the exclusive jurisdiction of the National Company Law Tribunal (NCLT), which is empowered to adjudicate issues of fraud, forgery, collusion, and validity of assignment deeds under Sections 65, 75, and 60(5)(c) read with relevant NCLT Rules, 2016.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 7, 60(5)(c), 63, 65, 75, 231; Civil Procedure Code, 1908 - Order VII Rule 11, Order XXXIX Rule 1 & 2; Commercial Courts Act, 2015 - Section 12A
Roseland Buildtech Pvt. Ltd. v. Vihaan 43 Reality Pvt Ltd, (Delhi) : Law Finder Doc Id # 2833503
