NCLAT Protects Access to Liquidation Property and Imposes ₹10 Lakh Costs

Decision in brief

The operative majority judgment held that NCLT had jurisdiction under Section 60(5)(c) of the Insolvency and Bankruptcy Code to protect access to the liquidation property. The obstruction arose during the insolvency and directly affected the ability of the liquidator to inspect, value and sell the asset.

The majority treated the case as protection of a pre-existing right recorded in a 1999 public order and exercised for more than two decades. It did not view the NCLT order as creating a completely new easement in favour of the corporate debtor.

The appeal was dismissed by a 2:1 majority. The two appellant companies were directed to pay ₹5 lakh each as costs to the Prime Minister’s National Relief Fund.

Background of the property dispute

Adya Oils and Chemicals Ltd. owned an industrial unit on land at Manglej village in Vadodara district, Gujarat. Access from the national highway had been taken through adjoining blocks since 1999.

ARC Research and Development Centre Limited later purchased the adjoining blocks in 2007. According to the liquidator, the corporate debtor continued to use the same route without interruption for more than twenty years.

The corporate debtor entered the corporate insolvency resolution process on 16 September 2019 and liquidation commenced on 4 March 2020. During the COVID-19 period, a wall was constructed that blocked the access. Although the wall was later removed, earth and mud were allegedly placed near the factory gate and practical access remained obstructed.

Relief granted by NCLT Mumbai

The liquidator applied to NCLT Mumbai under Section 60(5)(c) of the IBC. The application sought removal of the obstruction, protection of the right of way, appropriate entries in the land records and assistance from local authorities.

NCLT allowed the substantive reliefs on 22 January 2025. It found that access was important for maximising the value of the liquidation asset and accepted that the corporate debtor had enjoyed the route for the period required under Section 15 of the Indian Easements Act.

The owners of the adjoining land challenged this order before NCLAT, mainly on the ground that a disputed easement was a civil-law question outside the summary jurisdiction of the insolvency tribunals.

Main issue before NCLAT

The central question was whether Section 60(5)(c) allowed NCLT to decide and protect the right of way in these facts, or whether the liquidator had to file a civil suit.

Section 60(5)(c) gives NCLT jurisdiction over questions of law or fact arising out of or in relation to insolvency resolution or liquidation. The dispute therefore turned on the closeness of the connection between the blocked route and the liquidation process.

A second question was whether the NCLT order merely enforced an existing right or impermissibly created a fresh property right over land belonging to third parties.

Arguments of the appellant companies

The appellants argued that their land was not part of the liquidation estate and that NCLT could not burden it with an easement. They said that the existence, location and width of a prescriptive right of way required evidence and a civil trial.

They questioned whether the 1999 non-agricultural permission could bind later purchasers and contended that no registered document granted the route. They also claimed that another access was available.

According to the appellants, value maximisation under the IBC could not justify interference with the independent property rights of third parties.

Liquidator’s case

The liquidator relied on the 1999 non-agricultural order, long operational use of the route and the absence of any objection before the insolvency. The adjoining landowners had acquired their plots in 2007 but did not block the route for more than a decade.

It was argued that the obstruction appeared only after commencement of CIRP and liquidation. Without dependable road access, prospective buyers could not properly inspect or use the industrial property, which would reduce participation and price in the auction.

The liquidator also disputed the suggested alternative route because an intervening parcel belonged to an unrelated third party. Using that route could expose the liquidator or an auction purchaser to a fresh trespass dispute.

Why the majority found NCLT jurisdiction

The majority applied the direct-nexus test. It found that the obstruction arose during the insolvency process and affected the very access needed to inspect, value and realise an asset forming part of the liquidation estate.

Section 60(5)(c) uses wide language so that insolvency-related questions of law and fact can be handled through a single forum. In the majority view, sending the liquidator to a separate civil suit would delay the auction and reward conduct that interfered with liquidation.

The majority stressed that NCLT had not invented a new route. It protected a position recorded in the 1999 public order and supported by continuous use for more than twenty years. This distinction placed the dispute within insolvency jurisdiction on the particular facts.

Evidence and timing that influenced the majority

The record showed no contemporaneous objection to the route between 1999 and commencement of CIRP in 2019. Even after the appellants purchased the adjoining blocks in 2007, access continued for many years.

Satellite images for 2020 and 2025 were treated as objective support. They showed road approaches at the earlier stage and later loss of access after construction on the adjoining land.

The timing was also important. The obstruction arose after CIRP began, continued during liquidation and affected the scheduled sale. The majority considered the relationship between the appellant companies and the former promoters while drawing an inference that the conduct was intended to depress the value of the property.

Dissenting opinion of the Judicial Member

Justice N. Seshasayee disagreed with the majority. In his view, a disputed prescriptive easement required detailed pleadings, evidence, possible local inspection and cross-examination that belong in a civil court.

The dissent warned that urgency under the IBC and the objective of value maximisation cannot expand NCLT jurisdiction into every dispute affecting a liquidation asset. It emphasised constitutional protection of third-party property rights under Article 300A.

The dissent would have allowed the appeal, set aside the NCLT order and left the liquidator free to approach the civil court with permission under the proviso to Section 33(5) of the IBC. This opinion is important, but the 2:1 majority is the operative decision.

Final order and ₹10 lakh total costs

The majority affirmed the NCLT order and dismissed the appeal. The liquidator was permitted to take consequential steps, including seeking help from the local administration or police, so that the route remained free and wide enough for vehicles and machinery.

The route must also remain available for inspection by prospective bidders and for completing the sale process. All related applications were disposed of.

Because the majority found that the obstruction created artificial barriers in the liquidation process, it imposed costs of ₹5 lakh on each appellant. The combined amount of ₹10 lakh must be deposited in the Prime Minister’s National Relief Fund.

Practical significance of the ruling

• NCLT may protect a pre-existing property-related right when the dispute has a direct and proximate connection with insolvency or liquidation.
• A liquidator should show that the right existed before CIRP and that the obstruction arose because of or during the insolvency process.
• Value maximisation alone is not a substitute for jurisdiction. The facts must demonstrate a close nexus between the disputed conduct and realisation of the corporate debtor’s asset.
• Public records, historic permissions, land maps, photographs, satellite images and evidence of uninterrupted use can be important.
• Related parties and former promoters should not create physical or legal barriers designed to depress an auction price or deter genuine bidders.
• A claimed alternative route must be legally secure and commercially usable. A path through unrelated third-party land may not be an adequate alternative.
• Third-party civil rights remain important. Where the liquidator asks NCLT to create a new right or decide an independent title dispute, the appropriate forum may still be a civil court.

Checklist for liquidators facing blocked asset access

• Collect title records, non-agricultural permissions, sanctioned plans and revenue entries.
• Identify the exact route, dimensions and period of use.
• Preserve dated photographs, satellite images, maps and inspection records.
• Record when the obstruction began and how it affects valuation, inspection or auction participation.
• Check whether the disputed right existed before the insolvency commencement date.
• Identify any legally valid alternative access and any third-party land falling on that route.
• Place the effect on asset value and the auction process before the stakeholders consultation committee, where applicable.
• Seek narrowly framed relief that protects an existing right instead of asking the insolvency tribunal to create a new civil right.
• Document communications with landowners, local authorities and police.
• Consider a civil suit under Section 33(5) if the dispute is independent of liquidation or needs a full trial.

Limits of the precedent

The judgment does not mean that NCLT can decide every land, title or easement dispute involving an insolvent company. The majority relied on unusual facts: a 1999 public order, more than twenty years of use, no earlier objection, obstruction after CIRP and a direct effect on the liquidation sale.

The split decision also shows that the boundary of Section 60(5)(c) remains fact-sensitive. Liquidators should establish the insolvency nexus clearly, while third parties may still insist on a civil forum when the alleged right is new, seriously disputed or independent of the insolvency process.

Key takeaways

• The judgment was delivered on 29 July 2026 by the NCLAT Principal Bench.
• It is a 2:1 majority decision in Company Appeal (AT) (Insolvency) No. 292 of 2025.
• The majority held that NCLT had jurisdiction under Section 60(5)(c) because blocked access directly affected liquidation value and sale.
• The NCLT order protected an existing right of way rather than creating a fresh right.
• Satellite imagery, long use and the timing of the obstruction supported the liquidator’s case.
• The dissent would have sent the easement dispute to a civil court.
• The appeal was dismissed and total costs of ₹10 lakh were imposed on the two appellant companies.

Conclusion

The NCLAT ruling gives liquidators a practical remedy where a pre-existing access right is obstructed during insolvency to reduce the value of an asset. On the facts, the majority treated the dispute as part of the liquidation process and allowed NCLT to preserve the route under Section 60(5)(c).

At the same time, the dissent is a strong reminder that insolvency tribunals cannot automatically replace civil courts. The safest approach is to document the existing right, prove the direct connection with liquidation and seek relief limited to protecting asset value and the sale process.