Homebuyers' Locus to Challenge CIRP Withdrawal Recognized by NCLAT

Homebuyers' Locus to Challenge CIRP Withdrawal Recognized by NCLAT

Introduction

The National Company Law Appellate Tribunal (NCLAT), New Delhi has held that homebuyers have the locus to challenge the withdrawal of a Corporate Insolvency Resolution Process (CIRP) even if they failed to file their claims within the stipulated period.

Factual Background

CIRP was initiated against Hector Realty Venture Private Limited, and a settlement was reached between the corporate debtor and certain financial creditors, leading to the withdrawal of the CIRP. However, some homebuyers, who were not part of the settlement, challenged the withdrawal order.

Procedural Background

The NCLAT examined the role of the Interim Resolution Professional (IRP) in identifying and reaching out to stakeholders, particularly homebuyers, and assessed the effectiveness of the public announcement made by the IRP regarding the insolvency proceedings.

Issues

1. Whether homebuyers have the locus to agitate their claim at a belated stage due to non-filing of claims within the stipulated period?

2. Whether the withdrawal of CIRP was vitiated by fraud and suppression of material facts?

Contentions of the Parties

• Appellants' Contention: The homebuyers argued that they were never informed about the CIRP and only became aware of the withdrawal in January 2023. They asserted that their names and payment records were available in the corporate debtor's documents, and the IRP failed to contact or include them in the resolution process.
• Respondents' Contention: The respondents argued that the homebuyers had failed to file claims within the prescribed period and therefore could not challenge the CIRP withdrawal.

Reasoning and Analysis

The Bench comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha (Technical Member), and Mr. Indevar Pandey (Technical Member) held that:

• The IRP failed to effectively reach out to the homebuyers, despite their details being available in the corporate debtor's records.
• The failure to include all identifiable creditors in the Committee of Creditors (CoC) undermined the integrity of the CIRP.
• Consequently, the withdrawal process could not be sustained in law.

Implications

This judgment underscores the duty of IRPs to ensure effective communication and outreach to all stakeholders, particularly homebuyers, in insolvency proceedings. It reinforces that procedural lapses by the IRP can invalidate critical steps in the CIRP.

Outcome

The NCLAT allowed the appeal, set aside the impugned order, and directed the re-initiation of CIRP against Hector Realty Venture Pvt. Ltd.

Representation

In this case the appellant was represented by Mr. Bilal Ali, Advocate. Meanwhile the respondent was represented by Ms. Nisha G., Advocate.