Court emphasizes the necessity of considering home buyers' intervention applications first to ensure fair adjudication
In a recent judgment, the Karnataka High Court has dismissed the writ petition filed by Gulam Mustafa Enterprises Pvt. Ltd., a real estate developer, seeking judicial intervention to prioritize specific interlocutory applications before the National Company Law Tribunal (NCLT) concerning insolvency proceedings. The petitioner challenged the NCLT's order from March 17, 2026, which did not prioritize their interlocutory application (I.A. No.1094/2026) related to the ongoing insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The petitioner, engaged in the development of the "Global Techies Town" project, had issued substantial secured non-convertible debentures to finance the project. Disputes with debenture holders, including Piramal, led to insolvency proceedings despite a settlement being reached. Parallel proceedings initiated by another financial creditor also complicated matters, although subsequent dues were cleared.
The petitioner argued that their interlocutory application, addressing the maintainability of proceedings and alleged default, should be prioritized by the NCLT. Conversely, the respondents contended that the IBC proceedings are summary in nature, focusing on debt existence and default, and should not be stalled by interlocutory applications.
Crucially, certain home buyers filed Intervention Application No.13/2025, asserting independent rights and potential prejudice if proceedings concluded without their input. The High Court recognized the importance of these claims, emphasizing that home buyers' intervention applications must be considered first due to their significant impact on adjudication composition and fairness.
While dismissing the petitioner's request to prioritize their application, the court directed the NCLT to first address the home buyers' intervention application, ensuring the adjudicatory process remains fair and aligned with natural justice principles. The court refrained from micromanaging the NCLT's proceedings, respecting the adjudicating authority's discretion in regulating its procedure.
The High Court's decision underscores the judicial restraint exercised under Article 227 of the Constitution, avoiding interference in NCLT's procedural sequence while ensuring comprehensive and fair adjudication by considering all stakeholders.
Bottom line:-
Judicial intervention under Article 227 of the Constitution of India cannot be invoked to micromanage the sequence of adjudication before the National Company Law Tribunal (NCLT). However, in real estate insolvency matters involving home buyers, their locus and participation should be determined first to ensure fairness and adherence to principles of natural justice.
Statutory provision(s): Article 227 of the Constitution of India, Insolvency and Bankruptcy Code, 2016 Section 7
