New Delhi, The National Company Law Appellate Tribunal (NCLAT) has dismissed an appeal by Affle 3i Ltd challenging an NCLT order that allowed initiation of insolvency proceedings against Talent Unlimited Online Services Pvt Ltd.
However, a two-member bench of the appellate tribunal granted Affle 3i liberty to file a fresh application before the National Company Law Tribunal (NCLT) alleging fraudulent initiation of the Corporate Insolvency Resolution Process (CIRP).
“We do not find any good reasons to interfere with the impugned order as it stands,” said the NCLAT bench comprising Justice Yogesh Khanna (Officiating Chairperson) and Barun Mitra (Technical Member).
The Delhi bench of the National Company Law Tribunal (NCLT) on June 12, 2026, admitted the Section 7 application filed by Axis Trustee Services Ltd against Talent Unlimited Online Services, initiating CIRP.
However, Affle 3i, which holds Compulsory Convertible Preference Shares in Talent Unlimited, challenged this order before the appellate tribunal, NCLAT, under section 65 of the Insolvency & Bankruptcy Code (IBC), which is for Fraudulent or malicious initiation of insolvency proceedings.
It had contended before the appellate tribunal that CIRP was invoked on a “narrow debt” and default was ‘fraudulent’ to help the company’s suspended management evade enforcement of an arbitral award and inspection rights it had secured through the Delhi High Court and the Singapore International Arbitration Centre (SIAC).
However, NCLAT declined to accept Affle 3i’s allegation that the CIRP against Talent Unlimited were fraudulently initiated, holding that such a plea under Section 65 of the Insolvency & Bankruptcy Code cannot be raised for the first time at the appellate stage and must first be adjudicated by the NCLT.
“…. any grievance of fraudulent or malicious initiation of CIRP was required to have been raised by the Appellant (Affle 3i) before the Adjudicating Authority (NCLT) and adjudicated in accordance with law. An issue which was required to have been considered by the Adjudicating Authority in the first place cannot be raised by the Appellant at the appellate stage,” it said.
The tribunal noted that no foundational material supporting the fraud claim had been placed before the NCLT and that the threshold to prove malicious initiation under Section 65 is rigorous, requiring proof “beyond reasonable doubt” of deliberate intent to cause wrongful loss to creditors.
“In the absence of any cogent material having been placed before the Adjudicating Authority to demonstrate any dishonest design on the part of the suspended management to defraud creditors or to carry on business with an intent to deceive, we are not persuaded to hold that the Adjudicating Authority had knowingly omitted material facts basis which Section 65 of IBC could have been invoked,” said NCLAT.
The company contended that when Talent Unlimited Online Services ran into certain financial difficulties, it had proposed a (pre-insolvency) loan, which was turned down in favour of a competing proposal from Trifecta, which subsequently filed the Section 7 insolvency application.
Moreover, a post-admission settlement offer to clear the entire debt without a haircut went unanswered even as the Committee of Creditors proceeded with the resolution process.
This was opposed by Axis Trustee Services, a debenture trustee, which acted as the Financial Creditor, contending that Affle’s grievance stemmed purely from its position as a shareholder and did not amount to “aggrieved person” status under Section 61 of the Insolvency and Bankruptcy Code (IBC).
It also argued that the fraud allegation under Section 65 of the IBC was being raised for the first time on appeal, without having been pleaded before the NCLT.
The NCLAT held that debt and default stood clearly established on record, and that admission of a Section 7 application becomes near-mandatory once these are proved.
However, it allowed “liberty to the Appellant (Affle 3i) to place a proper Section 65 application before the Adjudicating Authority (NCLT) which may consider all contentions raised therein along with other aspects including the locus of the Appellant to file such an application to adjudicate whether the proceedings have been initiated in a fraudulent manner.”
