The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by Experts Realty Professionals and upheld the cancellation of insolvency proceedings against Noida-based Logix Infrastructure, calling the case a “fraudulent misuse” of the Insolvency and Bankruptcy Code (IBC) to shield the developer from liabilities in its long-delayed Blossom County housing project.

The tribunal bserved that Experts Realty Professionals and Logix were “related parties,” and the plea was merely “a guise” to shield the developer from financial liabilities.

The appeal was filed by Experts Realty Professionals, the financial creditor that started the corporate insolvency resolution process (CIRP).

“We find that the underlying loan agreement, commercial transaction, or financial debt was either fraudulent or malicious in nature. We find that there are clear fraudulent activities and collusion in the business transactions and (the NCLT) order under Section 65 (of IBC) is maintainable.” the tribunal order stated.

“Furthermore, it is to be noted that Logix candidly admitted debt and default without raising any objection. In the above background, we are compelled to come to the conclusion that this is nothing else but collusion between Logix and Experts Realty,” the order said.

With this new order, the ₹55 lakh penalty imposed earlier by NCLT, stayed during the appeal, must now be paid by Experts Realty to the Prime Minister’s National Relief Fund (PMNRF). The costs of Corporate Insolvency Resolution Process (CIRP) will also be borne by the financial creditor, the order said.

A bench of Justice N Seshasayee and Arun Baroka dismissed the appeal, saying: “The petition under the Insolvency and Bankruptcy Code (IBC) was fraudulent and aimed at protecting Logix from its dues to homebuyers and the Noida authority.”

Ketan Madan advocate on behalf of Experts Realty Professionals who filed a case against Logix, said on Sep 9 that “It’s a pervasive and completely misconceived order. We are going to challenge this order in the Supreme Court.”

The Logix case

The case concerns Blossom County, a 17-tower project with 2,384 units, launched in 2010. Only 10 towers have received occupancy certificates, leaving hundreds of buyers still waiting. The project was initially scheduled for completion in 2013. It has dues of more than ₹500 crore pending with the Noida Authority.

The case was based on an MoU signed on October 20, 2020. Experts Realty invested ₹15 crore in Logix’s project in return for 140,000 square feet of space, with a buy-back option. In December 2021, Logix acknowledged about ₹13 crore as liability, promising repayment within a month and interest of 18% per month on default, the Hindustan Times newspaper reported.

But the MoU and meeting records were not registered, stamped, or supported by collateral.

The NCLAT said that for such a large financial deal, safeguards and proper documents were expected. Their absence showed the deal was not a genuine loan but only meant to make Experts Realty appear as a financial creditor, the report quoted the order as saying.

The tribunal also noted overlapping roles of directors. Hemant Sharma, now with Logix, was earlier additional director in Experts Realty. He resigned on September 5, 2020, and joined Logix just six days later. His resignation was officially filed only in April 2021, after the MoU.

Sharma and Neeraj Gusain, director of Experts Realty, were also partners in another firm, New Greens Landkart LLP. Both signed the MoU on behalf of their companies. NCLAT said these connections showed the two companies were related parties under the IBC.