Civil Suit Dismissed: NCLT Holds Exclusive Jurisdiction Over Debt Disputes and Fraud Allegations Under IBC
Introduction
The Delhi High Court in Roseland Buildtech Pvt. Ltd Vs Vihaan 43 Reality Pvt Ltd has delivered a significant ruling reinforcing the exclusive jurisdiction of the National Company Law Tribunal (NCLT) in matters concerning debt disputes and allegations of fraud arising under the Insolvency and Bankruptcy Code, 2016. The Court categorically held that civil courts are statutorily barred from entertaining suits involving questions that fall within the adjudicatory domain of the NCLT under the IBC framework.
Background of the Dispute
Genesis of the Litigation
Roseland Buildtech Pvt. Ltd, the assessee, instituted a civil suit challenging proceedings initiated against it under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the NCLT, New Delhi. The financial creditor, Vihaan 43 Reality Pvt Ltd, had filed an application seeking commencement of Corporate Insolvency Resolution Process (CIRP) against the assessee.
Core Contentions Raised
The crux of the assessee's grievance centered on its assertion that it had completely satisfied all its financial obligations, and consequently, no legally recoverable debt existed that could justify invoking provisions of the IBC. The assessee maintained that the foundation upon which the insolvency proceedings were built was legally untenable.
Reliefs Sought by the Assessee
The plaintiff-corporate debtor approached the civil court seeking multiple declaratory reliefs:
- A declaration confirming that all liabilities arising from a loan agreement executed on 31.10.2006 between the assessee and the original lender had been fully discharged
- A declaration that the Business Transfer Agreement dated 06.03.2020, through which the alleged debt was assigned to the financial creditor, was void-ab-initio and legally non-binding upon the assessee
- Restraint on the financial creditor from proceeding with the insolvency petition
Financial Transaction History
According to the pleadings, the assessee had initially obtained a term loan facility amounting to Rs. 80 Crores from Sonata Investments Ltd. (subsequently referred to as defendant no. 2) pursuant to a loan agreement dated 31.10.2006. The original repayment tenure was twenty-four months from disbursement, which was later extended through a supplementary agreement dated 31.10.2010.
The assessee claimed that pursuant to certain corporate restructuring arrangements involving shareholding transfers, it made substantial payments to the financial creditor during FY 2023-24 and 2024-25, believing these payments would extinguish its liability under the original loan agreement.
Procedural History Before the High Court
Initial Orders
On 11.08.2025, the Delhi High Court granted exemption from mandatory pre-institution mediation requirements under Section 12A of the Commercial Courts Act, 2015 and proceeded to issue summons to the respondents. Simultaneously, notice was issued on the interim application filed under Order XXXIX Rule 1 and 2 of the Civil Procedure Code, 1908.
Application Under Order VII Rule 11 CPC
The financial creditor filed an application under Order VII Rule 11 of the CPC seeking rejection of the plaint on the ground that the suit was barred by the provisions of the IBC. The respondent contended that the civil court lacked jurisdiction to entertain the dispute.
Hearing Process
Extensive hearings were conducted on 09.10.2025, 06.11.2025, and 20.11.2025. The Court meticulously examined written submissions and legal compilations presented by both parties before arriving at its conclusion.
Arguments Advanced by the Financial Creditor
Jurisdictional Bar Under IBC
Senior counsel Mr. Darpan Wadhwa, appearing for the financial creditor, submitted that the suit constituted an improper attempt to circumvent and obstruct the statutory insolvency mechanism established under the IBC. He characterized the litigation as an instance of clever drafting aimed at forum shopping.
Exclusive Domain of NCLT
The respondent emphasized that the reliefs sought by the assessee directly challenged:
- The existence and enforceability of debt
- The validity and legal effect of the assignment deed
- The authenticity of documentation forming the foundation of the Section 7 petition
All these matters, it was argued, fall squarely within the exclusive jurisdiction vested in the NCLT under the comprehensive framework of the IBC.
Statutory Provisions Relied Upon
Counsel drew the Court's attention to several provisions of the IBC:
Section 63- bars civil court jurisdictionSection 64(2)- powers of the NCLTSection 65- fraudulent or malicious initiation of proceedingsSection 75- punishment for contraventionSection 231- bar of jurisdiction for adjudicating authoritiesSection 238- overriding effect of the Code
Self-Contained Code Argument
It was contended that the IBC constitutes a self-contained and comprehensive legislative framework specifically designed for expeditious resolution of insolvency disputes. Allowing parallel civil proceedings would defeat the very purpose and object of the legislation.
Abuse of Process
The financial creditor characterized the suit as attempting to achieve indirectly what the law prohibits directly - namely, stalling statutory proceedings and obtaining declaratory findings on issues already sub judice before the NCLT.
Submissions on Behalf of the Assessee
Limited Jurisdiction of NCLT at Admission Stage
Mr. Tanmaya Mehta, learned counsel for the assessee, argued that the NCLT does not possess jurisdiction at the admission stage under Section 7 to adjudicate upon the validity of assignment deeds or determine complex questions of fraud and forgery.
Documentary Inconsistencies
Counsel highlighted glaring inconsistencies in the Business Transfer Agreement, suggesting it was fabricated, forged, and antedated. He took the Court through purported anomalies in the document to demonstrate its questionable authenticity.
Presumption Favoring Civil Court Jurisdiction
Relying on Section 9 of the CPC, counsel argued that there exists a legal presumption favoring the jurisdiction of civil courts, and ouster provisions like Section 63 and Section 231 of the IBC must be construed strictly and narrowly.
Nature of Reliefs Beyond NCLT's Scope
The assessee contended that the reliefs sought fall outside the adjudicatory competence of the NCLT because:
- The tribunal cannot grant purely declaratory reliefs
- A borrower lacks standing to initiate independent proceedings against a financial creditor
- The NCLT cannot decide issues involving fraud, forgery, and foundational disputes regarding debt existence