NCLT Indore Permits Corporate Debtor to Complete Project Under Supervision of IRP

NCLT Indore Permits Corporate Debtor to Complete Project Under Supervision of IRP

Introduction

The National Company Law Tribunal (NCLT), Indore Bench, has held that a corporate debtor may be permitted to complete a project under the supervision of the Interim Resolution Professional (IRP) in a reverse Corporate Insolvency Resolution Process (CIRP) model, provided that a structured and viable revival plan is proposed by the corporate debtor.

Factual Background

A petition under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016, was filed by Swapan Kumar Dutta along with 19 other homebuyers against Global Mega Ventures Private Limited seeking initiation of CIRP. The homebuyers alleged that the Corporate Debtor defaulted in handing over possession of flats despite full or substantial payments as per builder-buyer agreements.

Procedural Background

The bench of Sh. Shammi Khan (Judicial Member) and Sh. Sanjeev Sharma (Technical Member) considered the maintainability of the petition and whether the Corporate Debtor could be allowed to complete the project through a reverse CIRP under the IRP's supervision. The Tribunal relied on precedents including the judgments of the Supreme Court in Vidharbha Industries and Samruddhi Co-op Housing Society Ltd. v. Mumbai Mahalaxmi Construction Pvt. Ltd., and NCLAT's ruling in Flat Buyers Association.

Contentions of the Parties

Homebuyers’ Contentions

The petitioners contended that the Corporate Debtor had committed default by failing to deliver possession of the flats within the promised timeframes, and had ignored delay compensations awarded under RERA. They supported the initiation of CIRP based on established default and financial debt under Section 5(8) of the IBC.

Corporate Debtor’s Contentions

The Corporate Debtor argued that the petition was not maintainable as the amounts claimed did not qualify as ‘financial debt’, and the petitioners were not ‘financial creditors’ under Section 5(7) of the IBC. The Corporate Debtor also claimed that the debt did not satisfy the "commercial effect of borrowing" test.

Reasoning & Analysis

The Tribunal held that the petitioners had filed sufficient documents such as builder-buyer agreements, payment receipts, and default computations. The tribunal noted that since the amounts were paid in return for promised possession or refunds with interest, the debt qualifies as ‘financial debt’ under Section 5(8) of the IBC.

The Tribunal rejected the Corporate Debtor’s argument, holding that the existence of debt and default suffices for admission even if the Corporate Debtor is a going concern. It further held that the default in delivery of possession is a continuing wrong, which creates a fresh cause of action under Section 18 of the Limitation Act.

The court acknowledged that a viable and structured revival plan had been proposed by the Corporate Debtor, which had been reviewed and found feasible by MPCON, thus justifying a reverse CIRP model. This aligned with the objectives of the IBC — especially value maximisation and avoiding liquidation where possible.

The Tribunal also held that cancellation letters issued by the Corporate Debtor were unilateral, coercive, and in violation of Section 19 of the RERA Act. It noted that such actions disregarded delay compensations and the incomplete status of the project, and were intended to pressure homebuyers into withdrawing the petition.

Implications

This decision has significant implications in real estate insolvency cases, reinforcing the judicial endorsement of the reverse CIRP model. It confirms that solvent debtors with feasible revival plans should be allowed an opportunity to complete the project without facing liquidation, provided the plan meets commercial viability standards.

Outcome

The petition was admitted, and the bench allowed the Corporate Debtor to complete the real estate project under the supervision of the IRP through a reverse CIRP mechanism. The Tribunal also quashed the cancellation letters, and restrained the Corporate Debtor from terminating allotments, imposing penal interest, or creating third-party rights or interests in the units during CIRP.

In this case the applicant was represented by Mr. Mohit Kr. Auluck, Advocate. Meanwhile, the respondent was represented by Mr. Saurabh Panedy along with Mr. Akshat Aggarwal, Advocates.