Authority: Supreme Court of India

Order Date: September 30, 2026

Case Overview

  • Parties: Appellant – Orris Infrastructure Private Limited (landowner of 47.218 acres at Sector 89, Gurgaon) and associated home‑buyer groups (Greenopolis Welfare Association, Greenopolis Welfare Confederation, Safalta Goel & Anr.). Respondents – Straight Edge Contracts Private Limited (operational creditor), Three C Shelters Private Limited (corporate debtor, CD), Three C Universal Developers Private Limited (shareholder of CD), and suspended directors of the CD.
  • Background: Orris entered a development agreement with Three C Shelters on 02‑11‑2011 to build the Greenopolis project (1,862 flats). The CD failed to complete construction; home‑buyers formed GWA and approached HRERA, which on 23‑01‑2019 ordered completion and directed escrow funds be used solely for the project. Subsequent HRERA order (07‑10‑2020) declared Orris as the primary developer and mandated escrow funds (Rs 53 crores) be transferred to a dedicated RERA account.
  • Insolvency Initiation: Straight Edge filed a Section 9 petition on 17‑10‑2019, claiming to be an operational creditor. An affidavit dated 27‑01‑2020 from CD director Girish Chander Joshi admitted the debt, leading the Adjudicating Authority (AA) to admit the petition on 20‑07‑2020 and appoint an IRP on 16‑10‑2020, imposing a moratorium.
  • Allegations of Fraud & Collusion: Home‑buyers and Orris contended that the Section 9 petition was fraudulent and collusive. The AA’s findings (para 46‑51) detailed:
  • No construction at the site since 2016.
  • Discrepancies in agreements dated 28‑11‑2017 and 07‑01‑2019, including unregistered MoU and mismatched investment figures (Rs 5 crores by Straight Edge vs. Rs 65 crores by Econovation Homes LLP).
  • Evidence that directors Rajiv Basoya and Girish Joshi were “pantry boys” with no genuine authority, and that the debt of Rs 29,95,91,034 was a mirage.
  • Escrow account held Rs 53 crores, which should be used only for construction, not by the Resolution Professional (RP).
  • NCLAT Decision: On 28‑08‑2023, NCLAT set aside the CIRP, holding that the AA had power under Section 65 to recall its own order when fraud is proved.
  • Supreme Court Review: The present Civil Appeals (Nos. 6797‑6801, 6792‑6796, 6802‑6806 of 2023) challenged the NCLAT judgment. The Court examined two key questions:

1. Whether the AA has jurisdiction to recall CIRP after admission of a fraudulent Section 9 petition.

2. If such power exists, whether the CIRP may continue.

  • Findings:
  • The Court affirmed the AA’s and NCLAT’s findings of fraud and collusion between Straight Edge and the CD’s suspended directors.
  • It held that the existence of a jurisdictional fact (the debt) was a “mirage”; therefore, the AA is empowered under Section 65 to recall the CIRP.
  • The Court explained the two‑stage nature of IBC proceedings: pre‑admission (in personam) and post‑admission (in rem), emphasizing that once admission occurs, the process involves all creditors and the RP, and the original applicant cannot unilaterally withdraw.
  • While the AA previously denied power to recall, the Court concluded that such power does exist and must be exercised when fraud is established.
  • Regarding continuation, the Court stated that the AA may, after hearing the RP, Committee of Creditors (CoC) and other stakeholders, decide to continue the CIRP, provided integrity and transparency are ensured.

Final Outcome

  • The Supreme Court set aside the NCLAT order and restored the CIRP proceedings (IB‑2721/ND/2019) to their original number.
  • It directed the Adjudicating Authority to decide, after due hearing, whether the CIRP should continue in view of the proven fraud and collusion, and to expedite the process if continuation is ordered.
  • All contempt petitions (C‑249‑253/2025) were closed, and pending applications for intervention/impleadment were disposed of.

Topics: Insolvency, Fraud, Corporate Governance