NCLAT Limits NCLT’s IBC Jurisdiction Over Disputed Easementary Rights

NCLAT draws jurisdictional boundary

The National Company Law Appellate Tribunal has held that the National Company Law Tribunal cannot adjudicate disputed easementary rights over land belonging to a third party while exercising jurisdiction under the Insolvency and Bankruptcy Code.

The ruling marks an important boundary around the matters that may be determined in insolvency proceedings. An IBC dispute may have a commercial connection with a corporate debtor or its assets, but that connection does not, by itself, bring every related property dispute within the NCLT’s adjudicatory remit.

The central issue was not merely the use or commercial importance of land. It concerned an asserted easementary right over third-party property and, crucially, that right was disputed. The NCLAT’s conclusion was that the NCLT could not decide that contested claim under the IBC.

Disputed right over third-party property

An easementary claim concerns a claimed right connected with the use or enjoyment of another person’s land. In the present development, the land was identified as belonging to a third party rather than the corporate debtor. That distinction is material because an insolvency forum’s authority over the corporate debtor and the insolvency process does not automatically translate into authority to determine contested rights affecting property owned by someone else.

The ruling therefore separates two questions that can otherwise become blurred during insolvency proceedings. One is whether access to or use of particular land is relevant to the corporate debtor or the insolvency process. The other is whether the claimed right over that land legally exists. The NCLAT has indicated that the NCLT cannot determine the second question when it involves disputed easementary rights over third-party land.

This is a jurisdictional ruling rather than a determination of the underlying easementary claim. It does not establish, merely from the reported holding, whether the asserted right exists or which side should ultimately succeed on that dispute. Its immediate effect is to identify what the NCLT cannot decide through the IBC framework.

IBC connection does not settle forum competence

For insolvency professionals, resolution applicants, creditors and other stakeholders, the decision highlights the need to distinguish between matters necessary for conducting an IBC process and disputes requiring adjudication of independent third-party rights.

Property access can be commercially significant. It may affect the use, operation or perceived value of an asset connected with a corporate debtor. But commercial significance is not the same as legal ownership or an established right of use. Where continued access depends on a contested easement over another person’s land, the underlying dispute cannot be treated as resolved simply because insolvency proceedings are underway.

The ruling also cautions against presenting an independent property-right dispute as an incidental insolvency issue. The NCLAT’s stated position turns on both the disputed nature of the easementary claim and the involvement of third-party land. Those features take the issue beyond a straightforward question concerning administration of the corporate debtor within the IBC process.

Due diligence implications for resolution applicants

The decision has practical relevance for parties assessing businesses and assets in insolvency. A physical asset may appear usable, but its actual commercial utility can depend on access routes or other rights involving neighbouring or third-party property. If those rights are disputed, bidders and advisers should not assume that the insolvency forum will conclusively establish them.

Legal and commercial due diligence should therefore distinguish among ownership, physical access, asserted access rights and rights that are contested. Each can have a different effect on the feasibility and valuation of an insolvency transaction. A claim described as an easement should not be treated as an established entitlement merely because it is important to the proposed use of the corporate debtor’s assets.

Resolution planning may also need to account for the consequences of leaving such a dispute unresolved. The NCLAT’s ruling means that reliance on an NCLT determination under the IBC is not an available substitute for establishing the disputed easementary right in an appropriate manner.

Third-party interests require separate attention

The involvement of land owned by a third party is a defining feature of the ruling. Persons who are not owners of the corporate debtor’s property may nevertheless be affected by steps proposed during insolvency. Where a proposed outcome depends on imposing, recognising or confirming a right over their land, the dispute cannot be reduced to an internal question in the insolvency process.

For professionals advising insolvency stakeholders, the decision supports early identification of third-party property dependencies. Transaction documents, asset descriptions and valuation assumptions should accurately reflect whether a claimed right is accepted or disputed. Treating a disputed claim as settled can create a misleading picture of the asset or business under consideration.

The same distinction matters when communicating with committees of creditors and prospective applicants. An operational requirement involving another person’s land may represent an unresolved legal dependency rather than a right that the NCLT can declare under the IBC. Stakeholders can then evaluate the commercial exposure without assuming that the insolvency process itself will remove the dispute.

A focused limit on NCLT authority

The reported holding should be read with precision. It concerns the NCLT’s inability under the IBC to decide disputed easementary rights over third-party land. It should not be expanded into a broader proposition about every property-related question that might arise during insolvency.

Its significance lies in the boundary it draws: the IBC forum cannot be used to obtain adjudication of the identified disputed third-party property right. The ruling consequently reinforces the need to examine the true legal character of a controversy instead of relying only on its commercial connection with an insolvency process.

Key takeaway

A disputed easement over third-party land cannot be treated as an issue that the NCLT may determine merely within IBC proceedings; insolvency stakeholders should identify such property dependencies separately and avoid treating the asserted right as established.