NCLAT Grants Avenue 54 Welfare Association Opportunity to Cure Defects in Insolvency Application

Appellate Tribunal Allows Registered Society to File Individual Affidavits to Validate Section 7 Application Against Sumer Radius Realty Pvt. Ltd.

In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) has provided relief to Avenue 54 Welfare Association, a registered society of flat purchasers, by allowing it to rectify defects in its insolvency application against Sumer Radius Realty Pvt. Ltd. The Principal Bench in New Delhi, comprising Justice Ashok Bhushan and Barun Mitra, delivered the judgment on November 26, 2025.

The dispute arose when Avenue 54 Welfare Association filed a Section 7 application under the Insolvency and Bankruptcy Code, 2016 (IBC), on behalf of its members, alleging a default by the corporate debtor in handing over the possession of flats and claiming a default amount of Rs. 203,27,66,369. The application was challenged on the grounds of maintainability due to inadequate authorisation from individual members of the welfare association.

The corporate debtors, Sumer Buildcorp Private Limited and Sumer Radius Realty Private Limited, contended that the application was not maintainable as the welfare association was not a financial creditor, and the authorisation was merely from the core committee, not from all members. They argued that without proper authorisation, the application should be dismissed.

In response, the counsel for Avenue 54 Welfare Association relied on the Supreme Court's precedent in JK Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills Company Ltd., asserting that applications by registered associations are maintainable. They offered to cure the defect by submitting individual affidavits from the members, which the adjudicating authority initially rejected.

However, the NCLAT, recognizing the curable nature of the defect, granted the welfare association a seven-day window to file individual affidavits and authorisations from the flat buyers, thus validating their representation in the insolvency proceedings. The Tribunal emphasized that the ends of justice necessitated providing an opportunity to rectify the procedural lapse.

The judgment underscores the NCLAT's commitment to ensuring procedural fairness and justice in insolvency proceedings, especially in cases involving collective interests such as those of homebuyers. The ruling is expected to set a precedent for similar cases where the representation of financial creditors through associations is questioned.

The adjudicating authority is now tasked with proceeding with the Section 7 application post the filing of the affidavits, in accordance with the law. This decision highlights the importance of proper authorisation in insolvency applications while also acknowledging the rights of collective entities like welfare associations to represent their members effectively.

Bottom Line:

Corporate Insolvency Resolution Process - Section 7 application under IBC filed by a registered society on behalf of its members - Defects in authorisation by members - Opportunity must be provided to cure the defect by filing individual affidavits and authorisations from the members.

Statutory Provision(s): Insolvency and Bankruptcy Code, 2016 Section 7

Sumer Radius Realty Pvt. Ltd. v. Avenure 54 Welfare Association, (NCLAT)(Principal Bench, New Delhi) : Law Finder Doc Id # 2813183