NCLT: Home Buyers are Entitled to File Petition under IBC Against Corporate Debtor for its Failure to Transfer Possession as per Builder Buyer Agreement
The National Company Law Tribunal (NCLT), New Delhi bench has observed that it is settled law that the Financial Creditors/homebuyers are entitled to file petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against the Corporate Debtor for its failure to hand over the possession in terms of the Builder Buyer Agreement by claiming the Principal Amount along with Interest payable (delay penalty as well as Interest payable for the delay).
The bench comprising of Bachu Venkat Balaram Das (Judicial Member) and Atul Chaturved (Technical Member) has allowed a reverse corporate insolvency resolution process (CIRP) for a group housing project under the supervision of the interim resolution professional (IRP).
In the instant matter, the application was filed by the Financial Creditors/ Applicants under Section 7 IBC, read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for CIRP, declaring moratorium and for appointment of Interim Resolution Professional (IRP), against the Corporate Debtor (CD)/Respondent viz., M/s. Sequel Buildcon Private Limited, on the ground that the Corporate Debtor had defaulted to make a Payment of a sum of Rs. 50,21,01,462.
It was submitted that the CD had cumulatively defaulted the Financial Debt paid by the Applicants/Financial Creditors/Allottees towards the purchase of their respective units, for the defaults committed against the Financial Debts being the non-delivery of the flats/non-payment of the amount paid by the Applicants in lieu of the units purchased.
The NCLT from the facts the case found that the present application was maintainable as all the applicants were eligible to be counted towards fulfilling the threshold limit as set out in Section 7 of the IBC.
The NCLT observed that, “indisputably the Corporate Debtor has committed default of financial debt owed to Allottees/Home Buyers/Financial Creditors. In terms of the Allotment Agreement(s) executed with the respective allottees, including the Applicants, the Corporate Debtor was required to hand over the possession of the allotted units to the Applicants within Forty-Two (including grace period of 6 months) months.”
Therefore, the bench observed that the Corporate Debtor had failed to hand over the possession of the said units and even today there are signs of possession in the near future.
The NCLT was of the considered view that the present project consisted of two phases and it was seen that in the projects/project categories, the applicants met the threshold limit of 10% or 100 persons, whichever is less.
In view of the above, the NCLT held that the application was maintainable in the eyes of the Law and admitted the same.
The NCLT reversed the insolvency proceedings and laid down some conditions. According NCLT, flats under Phase I of the project must be completed by January 2025 while the next phase, including the common areas, should be ready by January 2026.
Additionally, the developer must deposit Rs 20 crore into the Real Estate Regulatory Authority (RERA) approved escrow account within 30 days of the NCLT order.
Partner & Head – Insolvency and Restructuring Practice, Areness
Anjali Jain is a practising advocate and an alumnus of National Law University, Delhi and Lady Sriram College for Women, University of Delhi. She is heading the Insolvency and Restructuring practice at Areness, a full services law firm. She has spearheaded several complex litigations arising out of the Insolvency and Bankruptcy Code, 2016. Leading a versatile team of legal, finance and compliance professionals, she has guided several multinational corporations towards key turnarounds. Possessing a robust knowledge of statutory interpretation and being an ardent researcher, she is an active participant in development of the law on Insolvency, Corporate Restructuring, Debt Resolution. Also a member of INSOL International, she is one of the youngest faces at several national and international forums and discussions on the law. She is also a columnist and a resource person for Insolvency & Bankruptcy Code for leading names in the country.