NCLT Indore Bench Protects Rights of Homebuyers Amidst Insolvency Proceedings
Tribunal Rules Exclusion of Possessed Flats from Corporate Debtor's Assets, Upholds Homebuyers' Equitable Ownership
In a landmark decision, the Indore Bench of the National Company Law Tribunal (NCLT) has ruled in favor of homebuyers who had taken possession of their flats prior to the initiation of the Corporate Insolvency Resolution Process (CIRP) against Devvrat Developers Pvt Ltd. The tribunal emphasized that such flats are excluded from the assets of the corporate debtor and are not subject to the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC), 2016.
The ruling came in the case of Harminder Singh Bhatia vs. Devvrat Developers Pvt Ltd., where the applicant sought to protect his rights over a flat for which he had paid substantial consideration and had already taken possession before the CIRP commenced. The tribunal, comprising Member (Judicial) Mohan P. Tiwari and Member (Technical) Sanjeev Sharma, reiterated that homebuyers in possession of their allotted flats are not required to file claims before the Resolution Professional as these flats do not form part of the corporate debtor's assets.
The tribunal drew upon various legal precedents and statutory provisions to affirm that the rights of homebuyers must be upheld even after the resolution plan's approval. The judgment noted that the equitable ownership rights of homebuyers, who have paid considerable sums and taken possession, cannot be disregarded by the Successful Resolution Applicant (SRA).
Citing the Transfer of Property Act, 1882, the tribunal asserted that the interests of homebuyers in possession are protected against claims under CIRP. The court harmonized these provisions with the IBC to ensure that homebuyers are not deprived of their rights or the flats they have rightfully acquired.
This decision aligns with the Supreme Court's observations in similar cases, where it was held that the rights of homebuyers, who have invested their life's savings, cannot be nullified by the insolvency proceedings. The tribunal directed the SRA to execute and register the sale deed in favor of the applicant upon receiving the balance consideration, thus affirming the applicant's entitlement to the flat.
The judgment underscores the importance of balancing the interests of homebuyers with the objectives of the IBC, ensuring that the rights of individuals who have taken possession of their flats are respected and protected throughout the insolvency process.
Bottom Line:
Real Estate and Insolvency - Rights of homebuyers already in possession of allotted flats prior to the commencement of CIRP must be protected - Such flats are excluded from the assets of the Corporate Debtor and cannot be subjected to the moratorium under Section 14 of the IBC.
Statutory provision(s): Insolvency and Bankruptcy Code, 2016 - Sections 14, 31; Transfer of Property Act, 1882 - Sections 18, 53A; Companies Act, 2013 - Section 420(2); National Company Law Tribunal Rules, 2016 - Rule 11.
