NOIDA: The NCLAT has ruled that bankruptcy proceedings against Logix Infrastructure will not proceed, citing fraudulent misuse of insolvency law. The tribunal determined that the litigant, Experts Realty Professionals (ERP), and the Noida developer were “related parties,” and deemed the tribunal action as merely a facade to protect Logix from financial obligations.
The NCLAT upheld the National Company Law Tribunal’s (NCLT) February 2025 order that annulled corporate insolvency actions against Logix Infrastructure, noted for the problematic Blossom County housing project located in Sector 137.
In dismissing ERP’s petition against the NCLT ruling, Justice N Seshasayee (judicial member) and Arun Baroka (technical member) of NCLAT’s Delhi bench mandated ERP to pay a Rs 55 lakh penalty to the Prime Minister’s National Relief Fund, alongside covering the costs associated with the corporate insolvency process instigated by its legal actions.
The tribunal’s decision hinged on an MoU signed on October 20, 2020, in which ERP committed to invest Rs 15 crore in Logix’s project for 1.4 lakh sq. ft. in exchange for a buyback option. Logix, in a meeting on December 15, 2021, acknowledged a liability of approximately Rs 13 crore, pledging reimbursement within a month or subject to an 18% monthly interest penalty. However, the tribunal found that neither the MoU nor minutes from the meeting had been formalized with proper documentation, such as stamp paper or collateral.
NCLAT noted that in substantial financial engagements, safeguards and formal agreements are standard, and the absence of these factors indicated that the arrangement lacked genuine intent, portraying ERP falsely as a financial creditor.
The tribunal scrutinized the shifting relationships of directors among the entities, pointing out that Hemant Sharma, a director at Logix, had previously served as an additional director at ERP. He resigned on September 5, 2020, only to join Logix as a director a mere six days later. ERP only filed his resignation with the Registrar of Companies in April 2021, demonstrating an ongoing association at the time the MoU was executed.
Furthermore, both Sharma and ERP director Neeraj Gusain, signatories of the MoU, were associated as partners in another venture, New Greens Landkart LLP.
These interconnections led NCLAT to classify the companies as “related parties” within the parameters of the Insolvency and Bankruptcy Code. By not disclosing this relationship, ERP sought voting rights within the committee of creditors (CoC) to sway the resolution process, with the tribunal labeling this omission as indicative of fraudulent conduct.
“We find clear indications that the underlying loan arrangement was either fraudulent or malicious. There are evident collusions and irregularities in the business dealings, supporting the maintainability of the NCLT order under Section 65 of the IBC,” the tribunal declared. “Moreover, Logix openly acknowledged its debt and default without objections. Consequently, we conclude that this situation reflects collusion between Logix and Experts Realty,” it added.
Financial records were also examined, revealing ERP’s 2021 balance sheet classified its investment in Logix as a “current investment” rather than a loan. By 2022, Logix’s accounts indicated it owed Rs 21.16 crore to ERP, but this was later recorded as zero, implying the debt had been settled or canceled. Despite this discrepancy, ERP filed for an NCLT petition in 2023, alleging default. NCLAT viewed this inconsistency as a sign that the insolvency plea was a collusive strategy rather than a legitimate claim of default.
Blossom County, which comprises 17 towers and 2,384 units, was initially slated for completion in 2013. Over a decade later, only 10 towers have received occupancy certification, and about 500 homebuyers have managed to register their flats. The project still owes over Rs 500 crore to the Noida Authority.
Homebuyers contended that the insolvency petition was a tactic to enable Logix to evade its obligations to legitimate creditors, with ERP positioning itself as a financial creditor to attain 21% voting rights in the committee of creditors, which determines the outcome in insolvency processes.
ERP maintained that the petition was based on a valid loan agreement, arguing that the NCLT’s reversal constituted an impermissible reassessment of its prior admission order. They also claimed being a related party did not automatically imply fraud under the Insolvency and Bankruptcy Code. However, the NCLAT rejected these assertions, stating that undisclosed related-party connections, dubious documentation, and contradictory financial statements illustrated a deliberate misuse of the insolvency framework.
ERP’s attorney Ketan Madan characterized the NCLAT ruling as “misconceived,” indicating intentions to contest it in the Supreme Court.
“NCLAT’s dismissal of the appeal signifies a crucial affirmation of Section 65 of the IBC, clarifying that the code cannot be used as a means for collusion or recovery,” stated advocate Gaurav Rana, representative of the homebuyers before both NCLT and NCLAT. “This ruling ensures that wrongful initiation of corporate insolvency is strictly addressed, regardless of the phase of proceedings.” A group of homebuyers had contested ERP’s petition in NCLT, alleging a connection between Logix and the financial creditor.
