IRP's Authority to Partially Admit Claims in Project-Specific Insolvency Cases

The National Company Law Tribunal (NCLT) in Bengaluru has made a significant ruling that an Interim Resolution Professional (IRP) can partially admit financial creditor claims in cases where insolvency is confined to a single real estate project. This decision was announced by a coram of Judicial Member Sunil Kumar Aggarwal and Technical Member Radhakrishna Sreepada in an order dated November 28, 2025.

The tribunal upheld the partial admission of a claim filed by Asset Care and Reconstruction Enterprise Ltd (ARC) in the Corporate Insolvency Resolution Process (CIRP) of LGCL Urban Homes (India) LLP. The decision highlights the IRP's discretion to evaluate claims based on the specific circumstances of the project in question, rather than solely relying on entity-level loan documents.

The dispute arose from two loan facilities extended to LGCL Urban Homes under agreements dated September 15, 2020, and January 27, 2022, for working capital requirements across multiple projects. The original lender, PHL Fininvest Pvt Ltd, merged into Piramal Enterprises Ltd on August 12, 2022, and the loans, along with the security interests, were subsequently assigned to ARC under an assignment agreement dated March 27, 2023.

LGCL Urban Homes was admitted into insolvency on November 14, 2024. The CIRP, however, was expressly restricted to the real estate project “United Towers.” A public announcement inviting claims was issued on November 21, 2024. ARC filed a claim of Rs 101.48 crore on December 2, 2024, contending that the loans had been disbursed at the entity level and were therefore fully admissible in the CIRP.

During the claim verification process, the IRP sought project-specific utilization details. She noted that the construction of the United Towers project had stopped in 2019, prior to the first loan disbursement on August 10, 2020. ARC failed to produce material showing that the loan proceeds were utilized for the project under insolvency. The IRP therefore partially admitted the claim to the extent of Rs 5.6 crore, based on the value of the mortgaged unsold units forming part of the project.

Upholding this approach, the tribunal held that where the CIRP is confined to a single project, the burden lies on the creditor to establish a nexus between the debt and the project for which insolvency has been initiated. The tribunal found the IRP's reliance on Regulation 14 of the CIRP Regulations to arrive at a best estimate to be “reasonable and statutorily compliant.” The tribunal also noted that the applicant had frustrated the verification process by failing to furnish the documents sought. It observed that admitting the entire claim would allow a creditor to saddle a project with liability on the basis of entity-level loans disbursed in 2020, even though the project itself had ceased in 2019.

The tribunal dismissed the application and upheld the classification of ARC as an 'other creditor.' It held that ARC had failed to establish that the financial debt was specifically attributable to the United Towers project. This decision underscores the importance of project-specific scrutiny in insolvency proceedings and the need for creditors to provide clear evidence of the utilization of funds for the project in question.