# In the matter of E S Krishnamurthy & Ors. Vs. M/s Bharath Hi Tech Builders Pvt. Ltd. Civil Appeal No 3325 of 2020

> SC judgment dated 2021-12-14. Citation: TCN-2021-SC-00004. The case involves an appeal against the rejection of a petition under Section 7 of the Insolvency…

- **Court:** SC
- **Order date:** 14 Dec 2021
- **Citation:** TCN-2021-SC-00004
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/e-s-krishnamurthy-ors-vs-ms-bharath-hi-tech-builders-pvt-ltd-civil-appeal-no-332-ff735c27

## Summary

### Background

The case involves an appeal against the rejection of a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) by the National Company Law Tribunal (NCLT) and upheld by the National Company Law Appellate Tribunal (NCLAT). The appellants, financial creditors, sought to initiate Corporate Insolvency Resolution Process (CIRP) against the respondent, a corporate debtor, due to defaults in repayment. The NCLT dismissed the petition, directing the respondent to settle claims within three months, a decision affirmed by the NCLAT. The appellants challenged this dismissal, arguing that the NCLT and NCLAT acted beyond their jurisdiction by directing settlement instead of adjudicating on the default.

## Facts

The appellants, acting as financial creditors, filed a petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) to initiate Corporate Insolvency Resolution Process (CIRP) against M/s Bharath Hi Tech Builders Pvt. Ltd., the respondent, due to defaults in repayment. The genesis of the case stems from a Master Agreement to Sell, where the respondent was to develop agricultural land and pay interest to purchasers. A Syndicate Loan Agreement was also entered into to raise funds. The NCLT declined to admit the petition, directing the respondent to settle claims within three months, a decision upheld by the NCLAT. The appellants challenged this, arguing the NCLT and NCLAT exceeded their jurisdiction by directing settlement instead of adjudicating on the default.

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## Issues and analysis

### Issue 1: Whether the NCLT and NCLAT were correct in rejecting the appellants' petition under Section 7 of …

**Ratio:** The Adjudicating Authority's role under Section 7 of the IBC is limited to verifying

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**Reasoning:** The Supreme Court reasoned that the NCLT and NCLAT acted outside their jurisdiction by

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**Interpretation:** Section 7(5) of the IBC provides only two options for the Adjudicating

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**Application:** In this case, the NCLT and NCLAT erred by directing the respondent to settle

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## Parties

- **Judges:** Dr Dhananjaya Y…
- **Appellants:** E S Krishna…
- **Respondents:** M/s Bharath Hi…

## Timeline

- **2014-06-22 — Master Agreemen…**: Respondent, IDBI Trusteeship Limited, and Karvy Realty (India) Limited entered into a…
- **2014-11-22 — Syndicate Loan…**: A Syndicate Loan Agreement was entered into between the respondent, IDBI Trusteeship…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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