IBC Prevails Over RERA On Individual Refund Rights In CIRP; Homebuyers Bound By Class Decision On Resolution Plan: NCLT Mumbai

 

IBC Prevails Over RERA in Case of Conflict with Individual Refund Rights; Homebuyers Bound by Collective Class Decision: NCLT Mumbai

Cause Title: Vivek Talwar & Others v. Rajesh Jhunjhunwala, Resolution Professional & Others
Case No.: I.A. (IB) No. 3688 of 2025 in C.P. (IB) No. 389/MB/2022

The National Company Law Tribunal, Mumbai Bench, has held that a resolution plan cannot be required to incorporate an individual homebuyer's right to seek refund under Section 18 of the Real Estate (Regulation and Development) Act, 2016 (“RERA”), where enforcement of such individual right is inconsistent with the collective insolvency resolution process contemplated under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

A Bench comprising K.R. Saji Kumar, Member (Judicial), and Anil Raj Chellan, Member (Technical), dismissed an application filed by four homebuyers seeking reconsideration of the resolution plan of Spenta Enclave Private Limited and, alternatively, seeking directions for provision of an exit and refund mechanism for homebuyers who did not wish to continue with their respective units.

The applicants had booked two flats in the “Altavista” project developed by Spenta Enclave Private Limited and had paid approximately ₹89.23 lakh and ₹86.71 lakh towards the purchase consideration between 2017 and 2021. Although possession was initially represented to be delivered by December 2019 and subsequently by December 2020, the project remained incomplete. Consequently, the applicants sought refund and initiated proceedings before the State Consumer Disputes Redressal Commission in July 2022, prior to commencement of the CIRP.

The CIRP commenced on 24 March 2023. During the CIRP, the applicants submitted their claims as homebuyers, which were admitted by the Resolution Professional. They subsequently informed the Resolution Professional that they were unwilling to pay the balance consideration and did not wish to continue with the project. Their grievance was principally directed against the resolution plan on the ground that it did not provide an exit or refund mechanism for homebuyers seeking withdrawal under Section 18 of RERA.

The applicants relied upon Clause 18 of their respective Agreements for Sale, which contemplated refund with interest in the event of failure to deliver possession within the stipulated period. It was contended that the Successful Resolution Applicant (“SRA”), upon taking over the project, would step into the shoes of the erstwhile promoter and would consequently be bound by the contractual and statutory obligations owed to the applicants under RERA.

The resolution plan, however, specifically provided that “no cancellation of the Units by the Homebuyers will be entertained by the Resolution Applicant.” The applicants contended that such a provision amounted to an impermissible unilateral alteration of their contractual and statutory rights.

The Tribunal rejected the contention. It examined the scope of Section 18 of RERA, which enables an allottee, in specified circumstances, to seek return of the amount paid together with interest where the promoter fails to complete the project or is unable to give possession in accordance with the agreement. However, the Tribunal observed that, at the relevant stage, the SRA could not be treated as having stepped into the shoes of the erstwhile promoter.

The Tribunal noted that the resolution plan had not yet been approved by the Adjudicating Authority and, consequently, the SRA had not assumed control of the project. Its obligations to complete the project would arise in accordance with the resolution plan upon its approval. The SRA therefore could not, at that stage, be treated as having assumed all contractual obligations arising from agreements entered into between the applicants and the Corporate Debtor.

The Tribunal further noted that the CoC had considered the applicants' request for refund and had concluded that cancellation of units and consequent refund would adversely affect the cash flows of the Corporate Debtor. The Tribunal also took note of the fact that homebuyers constituted approximately 22.66% of the voting share in the CoC and had approved the resolution plan through their Authorised Representative, whereas the four applicants collectively represented approximately 0.22% voting share.

In this context, the Tribunal emphasised the collective nature of the insolvency resolution process and observed that the SRA ought to be permitted to take over the Corporate Debtor in accordance with the approved resolution framework, without being subjected to liabilities in a manner inconsistent with the resolution plan. The Tribunal also noted that the SRA was not a party to the proceedings and, therefore, relief affecting its rights and obligations could not appropriately be granted without affording it an opportunity of being heard.

Interplay between RERA and IBC

On the interplay between RERA and the IBC, the Tribunal observed that the two enactments operate in distinct fields. While RERA seeks to protect the interests of individual homebuyers and regulate the real estate sector, the IBC provides a collective statutory mechanism for resolution and revival of financially distressed corporate entities.

The Tribunal held that, where the provisions of the two enactments operate inconsistently, Section 238 of the IBC gives the Code overriding effect. Consequently, an individual remedy available to a homebuyer under RERA cannot be enforced in a manner that defeats or undermines the collective insolvency resolution process under the IBC.

The Tribunal also relied upon the statutory framework governing homebuyers as a class of financial creditors. In particular, it referred to Section 25A(3A) of the IBC, under which the Authorised Representative is required to cast votes in accordance with the decision taken by the requisite majority of the homebuyers comprising the relevant class. The Tribunal accordingly held that an individual homebuyer cannot seek treatment contrary to the collective decision of the class merely because such individual homebuyer may otherwise possess a separate remedy under another enactment.

The Tribunal further observed that it could not direct modification of the commercial terms of a resolution plan or compel the CoC or the SRA to renegotiate the terms of the plan.

The Tribunal underscored that the insolvency resolution process under the IBC proceeds on the basis of collective resolution of claims and balancing of the interests of various stakeholders. Since the applicants' claims had already been admitted within the CIRP, they could not insist upon a separate, individualised remedy outside the insolvency framework where such remedy was inconsistent with the resolution plan and the collective decision-making process under the IBC.

The Tribunal also took note of the fact that substantially similar refund claims had earlier been rejected in applications filed by the same applicants in 2024 and that the said orders had not been challenged before the Appellate Tribunal. The earlier orders had consequently attained finality.

In view of the above, the Tribunal found no sufficient ground to interfere with the resolution plan or to direct its reconsideration and accordingly dismissed the application without costs.

NCLAT - Creditors of a class for amended Section 7(1) threshold of 10% or 100 whichever is Lower must be from a particular project registered with RERA

Pankaj Mehta V/s M/s. Ansal Hi-tech Township Limited 

Company Appeal (AT) (INS) No. 248 of 2023 

(Arising out of the `Impugned Order’ dated 06.01.2023 in CP (IB) No. 596 (PB) / 2021)

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI  

Time line of the Matter :-

1. The ‘Appellant / Financial Creditor / Applicant’, along with106 other ‘Financial Creditors / Applicants’, had preferred petition ,under Section 7 of the I & B Code, 2016 before NCLT PB New Delhi.
2.  Wherein, M/s. Ansal Hi-Tech Township Limited, was described as the ‘Corporate Debtor’ and the Total Amount of Debt, was mentioned as Rs.41,81,90,116/- 
3. On Date 06/01/2023, NCLT,  dismissed the main Company Petition as `Not Maintainable’ terming that the `Allottees’, belong to different Sub Projects.

Fact of the Case:- 

1. A Project by the name of  'Sushant Megapolis near Dadri Town, adjoining Greater Noida, Uttar Pradesh.  by Corporate Debtor M/s Ansal comprises of Plots / Built-up Plots/ Row Houses/ Flats / Floors /  Villas / High-rise Apartments, under various allocated Sites.
2. License for developing the Township, was granted  in Year2006, by the UP Government with the instruction of Entire Construction be completed by year 2016.
3. By 2016 the Project was incomplete and M/s Ansal registered 25 separate projects having separate `RERA Registrations’ in this Township with RERA.
4.  Appellants are 107 different Allottee  who purchased different types of Units such as Plots / Flats/ Apartments /EWS unit , in the Project.
5. The Possession date of all the allottees  was from 36 months to 42 months, from the date of sanction of the `Layout Plan’ of the `Allotted Unit’. 

Submissions by Appellant

1.  All the Applicants had entered into respective BBAs, much before the RERA Act,2016 came into force.
2.  The said `Agreements’, specifically, defines that `Sushant Megapolis’, as one complete `Project’.
3. The `Single Layout Plan of this project reflects Group Housing/ Plots and EWS Units as part of `One Project’, comprising of 2504 Acres of Property.
4. A Single  Application for Environmental Clearance, was filed for the entire project. 
5.  The Project in question, is a `Single Real Estate Project’, for the purposes of Section 7 of the IB Code, 2016.
6. It therefore, falls under the requisite ambit of the provisos of the amended Section 7(1) of the IB Code 2016 pertaining to the minimum threshold requirement of 100 Allottees or 10% of the Total Allottees, whichever is less, belonging to the `same Real Estate project’. 
7. The NCLT, Passed the impugned Judgment without considering the decision of Hon’ble Supreme Court in Manish Kumar v. Union of India & Ors  (2021) 5 SCC OnLine SCC 1, wherein, it is observed that a Real estate project can be a composite one for Plots and Apartments or for Plots & Buildings.
8. Further, the definition of `Allottee’, is split into broadly three Categories Plot, Apartment and Building and the `Purchasers’ of all these are covered under the term `Allottee’ 
9.  The interpretation, laid down by the was incorrect  that 100 or 10% of the `Allottees’, must be from the `same Building’, and `not from the same `Real Estate Project’.

Submissions by Respondent

1. The Township, consists of Multiple Residential  and Commercial Real Estate Project, and all the sub-projects, are independent of each other and are being developed and sold as separate Projects.
2. Each and Every phase, is registered as a stand-alone Real Estate Project under RERA with separate `RERA Registration Numbers’
3. As per Hon’ble Supreme Court of India, that the task of ascertaining who will be Allottees and therefore, what would constitute 10% of total number of Allottees must depend upon the nature of the `Real Estate Project’.
4.  The Petitioners do not satisfy the required threshold limit of 10% or 100 persons’, whichever is lower, in none of the Project / Project categories, 
5. Approximately 50 Petitioners are either Co-Applicants or Third Applicants for a Single Unit just to fulfill the requisite number of 100 Allottees. whereas in the matter of Manish Kumar v. Union of India, wherein, it is held that `one unit equals to one Allottees’, even though, the said Unit is jointly held. 
6. The NCLT  made ‘inquiry’ and considered all the records pertaining to the Project.

Observations made by the Hon’ble Court.

1. The Corporate Debtor, had executed, at least Three different kinds of Agreements, namely  (a) `Plot Allottee Agreement’ (b) `Built-up Unit Allottee Agreement’ and (c) `Apartment Allottee Agreement as the projects were of `different character’ with `different type of developments with independent, RERA Registrations. ’
2. In none of the Projects / Project Categories, the Applicants  fulfil the requirement of Threshold Limit’ of 10% or 100 persons, whichever is less. 
3. the Appellant are from different numerous projects, and they have not established their case, as `Creditors of a class’, concerning any `particular project’, registered with RERA, with a view to fulfil the requirement of  Section 7 (1) of the IBC in regards to 10% or 100 Allottees’
4. In the present case on hand, the foremost aspect to be taken into account is the RERA Registration of the Projects, of the Corporate Debtor, for ensuring the Initial limit for pressing into service of the ingredients of Section 7 of the Code. 
5. The `Impugned Order’ and the views expressed in dismissing the CP (IB) No. 596 (PB) / 2021, is free from any `legal flaws’. 

Court’s Order

Accordingly the instant `Appeal’ sans merits is `Dismissed’ with no costs.

Whether a Home Buyer individually oppose to Resolution Plan when the Home Buyers as a class has voted by a majority in favour of the Plan – Jyotsna Kailash Veera Vs. Mr. Manish Motilal Jaju – NCLT Mumbai Bench ONJULY 21, 2023

 Whether a Home Buyer individually oppose to Resolution Plan when the Home Buyers as a class has voted by a majority in favour of the Plan – Jyotsna Kailash Veera Vs. Mr. Manish Motilal Jaju – NCLT Mumbai Bench

ONJULY 21, 2023

The Adjudicating Authority held that in the light of what has been held by the Hon’ble Supreme Court in the Jaypee Kensington Boulevard Apartments Vs. NBCC (India) Limited and others (2021) ibclaw.in 63 SC it becomes abundantly clear that Home Buyers can vote for or against the Plan only as a class and if there are some Home Buyers pitted against the Resolution Plan, who are otherwise in minority, absolutely no locus to oppose the Plan in the capacity of dissatisfied Home Buyers. It is also abundantly clear that such dissenting minority segment within the class of Home Buyers cannot arrogate themselves to be dissenting Financial Creditors. That being the legal position, which is explained in unequivocal terms by the Hon’ble Supreme Court in Jaypee Kensingtons case, in our considered view, any objection raised by the socalled minority Home Buyers raising objection against the Plan, which have been approved by them as a class, cannot be entertained and are liable to be rejected at the very threshold without going through the merit of such objections

Supreme Court : Even after a petition under Section 7 of the IBC is admitted and before the Committee of Creditors is formed, the parties can settle the dispute

 Supreme Court : Swiss Ribbons Pvt Ltd and Anr. v. Union of India and Ors (2019) 4 SCC 17

Even after a petition under Section 7 of the IBC is admitted and before the Committee of Creditors is formed, the parties can settle the dispute. Further, even after the CoC is formed, Section 12A of the IBC does provide for a mechanism through which the petition can be withdrawn (if the parties were to reach a settlement);

Supreme Court : NCLT can not dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors

 Supreme Court :ES Krishnamurthy v. M/S Bharath Hi Tech Builders Pvt Ltd.,

the legal issue before the apex court was whether the NCLT can, without applying its mind to the merits of the petition under Section 7, simply dismiss the petition on the basis that the corporate debtor has initiated the process of settlement with the financial creditors.

The Court found that the NCLT and NCLAT had abdicated their jurisdiction to decide a petition under Section 7 by directing the respondent to settle the remaining claims within three months, noting that such a course of action is not contemplated under the IBC except either admit or reject an application respectively contemplating occurrence of debt and default.

The Bench stated that while settlements can be encouraged by the NCLT and NCLAT to achieve the objectives of the IBC, however, "they cannot direct them by acting as courts of equity."