New windows opening in favour of Home Buyers; Developer in leaning mode 

 In civil appeal No. 3778 of 2020 in the Supreme Court before the bench of M.R. Shah; B.V. Nagarathna, J  in case of  Amit Katyal V/S  Meera Ahuja & others, Apex  court allowed withdrawal of Corporate Insolvency Resolution Process (CIRP) against a builder in an application filed by three homebuyers in view of a settlement plan agreed upon by the majority of them. In the larger interest of the homebuyers, the apex court exercised power under article 142 to permit withdrawal of the CIRP proceedings and set aside all matters pending between the parties,this order is passed on  March 03, 2022

Apex Court held- Insolvency and Bankruptcy Code, 2016 - The object and purpose of 14 the IBC is not to kill the company and stop/stall the project, but to ensure that the business of the company runs as a going concern

Dr Prem Lata ,Legal Head VOICE

This  was yet another way by which Home buyer’s  interest is protected by making an arrangement to settle their dispute in a very short procedure before NCLT. For Years together home buyers were dependant on Consumer Commissions only for redressal of their grievance &refund of their hard earned money invested with builders. Then came RERA Act 2016 as an additional remedy to home buyers and it made a remarkable change in real estate sector. Amendment in section 5 of IBC 2016 made home buyers Finacial creditors which was another boost for consumers. This is yet another window opened for investors in developers projects and now NCLT also came ahead in settling the accounts between disputing parties .

The courts are creating history by adopting very positive approach towards the aggrieved consumers through number of judgments during the last decade which is big relief to the general public at large . In the above case Hon’ble Supreme court has exercised its power under Art 142 of the constitution which is done in rare cases and given relief to both the parties ,home buyers as well as to the developers and brought an end to the litigation.   

Facts of the case

Facts leading to the above order are that Home buyers in the housing project, Krrish Provence Estate at Gurgaon had gone against Jasmine Buildmart Pvt.  and invoked  Section 7of  IBC 2016  before the Adjudicating Authority/NCLT, Delhi in CP No. 1722/ND/2018 seeking initiation of CIRP against Builder, the  Corporate Debtor and obtained order in their favour NCLT/Adjudicating Authority admitted Section 7 application on 28.11.2019 and appointed the Interim Resolution Professional ‘IRP’ and declared a moratorium. The original applicants had  sought refund of an amount of Rs.6,93,02,755/- due to an inordinate delay in the completion of the project and failure to handover possession within the stipulated time and could not complete the project even after a period of eight years. Builders knock at the door of SC for stay on the insolvency  proceding against them as ordered by NCLT  in view of the fact that parties have settled the matter between themselves and petitioner/home buyers be allowed to withdraw their application under section 7 of IBC 2016.

    Applicability of IBC 2016 - As per Section 12A Insolvency and Bankruptcy Code, 2016;, a party can approach NCLT/Adjudicating Authority directly and the Tribunal may in exercise of its powers under Rule 11 of the NCLT Rules, allow or disallow an application for withdrawal or settlement. In an appropriate case and where the case is being made out and the NCLT is satisfied about the settlement, may permit/allow an application for withdrawal or settlement at any stage before a COC is constituted.

How the matter got  resolved

It is revealed before the Court that out of 128 home buyers of 176 units, 79 + 3 (i.e. 82) home buyers have settled the dispute with the corporate debtor including the original applicants/respondent nos. 1 to 3 who have initiated the IBC proceedings. It is reported that the original applicants/ respondent   Nos.1 to 3 as well as 79 home buyers have settled the dispute with the corporate debtor in terms that the corporate debtor shall complete the entire project and hand over the possession to the home buyers who wanted   possession within a period of one year from today. In view of this development & Pursuant to order dated 4.2.2022, 1 to 3 original applicants before the NCLT who has initiated the proceedings under Section 7, file an application for withdrawal of the proceedings. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. In the present case, as observed hereinabove, although the COC was constituted on 23.11.2020, there has been a stay of CIRP proceedings on 3.12.2020 (within ten days) and no proceedings have taken place before the COC. It is to be noted that the COC comprises 91 members, of which 70% are the members of the Flat Buyers Association who are willing for the CIRP proceedings being set aside, subject to the appellant and the Corporate Debtor – company honouring its undertaking given to this Court as per the settlement plan dated 3.2.2022.  Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant/Corporate 7 Debtor, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings.

 the original applicants have preferred IA No. 18679 of 2022 under Article 142 of the Constitution of India read with Rules 11 and 12 of the National Company Law Tribunal Rules, 2016, praying for permitting the original applicants to withdraw CIRP proceedings on their being paid a sum of Rs.3,36,02,000/- along with applicable interest, out of the amount deposited by the appellant in the Registry of this Court. It is also further prayed to dismiss all matters pending between the appellant and respondent

The Jasmine Buildmart Pvt. Ltd. are directed to file separate undertakings before this Court, within a period of one week from today, specifically stating and undertaking that:

 (1) they shall complete the entire project within one year from 01.03.2022 and offer the possession to the respective home buyers;

(2) they shall complete the entire project including all the apartments, common areas, amenities, etc. as specified in the ABA;

 (3) all demands be raised and timely paid, strictly in terms of ABA;

(4) Company shall continue the provisions of all maintenance services as per the ABA; and (5) Company will make the application for obtaining Occupancy Certificate within six months, before the competent authority.

By Dr Prem Lata ,Legal Head VOICE

 

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