NCLAT Dismisses Reliance Realty's Insolvency Plea Against Altruist Customer Management

The National Company Law Appellate Tribunal (NCLAT) has set aside an appeal filed by Reliance Realty, a major player in the real estate sector, seeking insolvency proceedings against Altruist Customer Management. The appellate tribunal upheld the order of the Delhi-based National Company Law Tribunal (NCLT), which had previously rejected the insolvency plea.

A three-member bench of the appellate tribunal affirmed the NCLT's decision, which dismissed the plea on October 5, 2024. The NCLT had observed a pre-existing dispute over Rs 24.34 crore between the two parties. The NCLAT stated, “We therefore don't find any infirmity in the conclusions and the findings of the Adjudicating Authority (NCLT). Adjudicating Authority correctly rejected the Section 9 petition due to the existence of a bona fide dispute.”

Reliance Realty, as an operational creditor, had filed a Section 9 Petition on account of operational debt, specifically rental dues for the period between May 2019 and September 2022. These dues were owed by Altruist Customer Management for the possession and occupation of a premise situated at TTC Industrial area in Thane, Maharashtra, comprising the ground plus three upper floors, each measuring 11,566 square metres.

The NCLT Delhi dismissed the application on the grounds of a pre-existing dispute related to the percentage of debt liable to be paid to Reliance Realty by Altruist Customer Management as per the licence agreement. This decision was subsequently challenged by Reliance Realty before the National Company Law Appellate Tribunal (NCLAT).

However, NCLAT also rejected the appeal, stating, “We find this dispute is not a moonshine or illusory and cannot be determined in the insolvency proceedings.” According to NCLAT, the dispute predates the issuance of the demand notice under Section 8 of the Insolvency and Bankruptcy Code (IBC), thereby triggering the provisions under Section 9(5)(ii) of the Code, which mandate the rejection of the Section 9 petition.

NCLAT further elaborated, “We find in this case that a disputed fact needs to be appreciated based on evidence under the Indian Evidence Act, and in such a situation, the adjudicating authority's role is limited to ascertaining if the genuine dispute is present or not.” The tribunal emphasized that even evidence such as an arbitration notice or termination notice, or a reply to a termination notice, are signals of pre-existing disputes. The NCLAT stressed that it should not get involved in sifting through complex contentions on giving a judgment on the merits of the dispute.

In its 53-page-long order, NCLAT concluded, “The appeal filed by appellant Reliance Realty Limited is accordingly dismissed with no costs.”