Pranav B Prem

The Indore Bench of the National Company Law Tribunal (NCLT), comprising Shri Shammi Khan (Judicial Member) and Shri Sanjeev Sharma (Technical Member), has allowed a petition filed by 27 homebuyers under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) against Global Mega Ventures Pvt. Ltd., admitting the matter into the Corporate Insolvency Resolution Process (CIRP). The Tribunal held that where a structured and viable plan for completion of a real estate project is proposed by the corporate debtor, the project may be allowed to proceed under the reverse CIRP model, subject to supervision by the Interim Resolution Professional (IRP).

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The petition was initiated by a group of homebuyers led by S.K. Dutta, who had booked flats in the GMV OLAAN project launched by the Corporate Debtor at Park City, Bhopal. The applicants claimed that despite having paid substantial amounts between 2013 and 2017, possession of the units was not handed over. The default, as alleged, was continuing in nature and met the criteria of financial debt under Section 5(8)(f) of the IBC, since the amount was advanced against time-bound delivery of flats with stipulated compensation for delay.

The Corporate Debtor contested the maintainability of the petition, contending that the applicants did not qualify as financial creditors and the amounts paid did not constitute financial debt. It further argued that several of the petitioners had initiated proceedings before RERA and obtained compensation or refund orders, and that some of the claims were barred by limitation.

The Tribunal rejected these objections, noting that the applicants had produced builder-buyer agreements, payment receipts, ledger accounts, and default computations to support their claims. The Tribunal held that the nature of the advance payments and the agreed stipulation of interest for delay conferred upon the transactions the “commercial effect of a borrowing,” thus qualifying as financial debt under Section 5(8) of the Code. Relying on the Supreme Court’s ruling in Pioneer Urban Land and Infrastructure Ltd. v. Union of India [(2019) 8 SCC 416], the Tribunal reiterated that amounts raised from homebuyers for real estate projects constitute financial debt.

On the issue of limitation, the Tribunal observed that the default in handing over possession constituted a continuing cause of action. It also took note of emails and other communications from the Corporate Debtor promising completion, which amounted to an acknowledgment of liability under Section 18 of the Limitation Act. The judgment further referred to the Supreme Court’s decision in Samruddhi Co-op Housing Society Ltd. v. Mumbai Mahalaxmi Construction Pvt. Ltd [Civil Appeal No 4000 of 2019], affirming that such continuous defaults give rise to a fresh cause of action.

Importantly, the Tribunal considered the plea of the Corporate Debtor to be allowed to complete the project under its own management and supervision. The Tribunal noted that the Corporate Debtor had proposed a structured revival plan involving infusion of fresh funds and timelines for completion. The plan had been vetted by MPCON Ltd., a government body that found it feasible. The Tribunal observed that in cases involving real estate projects, particularly where homebuyers form the majority of financial creditors, the model of reverse CIRP—allowing the promoter to complete the construction under the IRP’s supervision—has been recognized by the NCLAT in Flat Buyers Association Winter Hills–77, Gurgaon [Company Appeal (AT) (Insolvency) No. 926 of 2019 (NCLAT order dated 04.02.2020)]

In that light, the Tribunal found the proposal of the Corporate Debtor to be in alignment with the objective of value maximization under the IBC. It observed that solvent debtors offering viable and structured completion plans should be permitted to implement the same under appropriate supervision, rather than being pushed into liquidation. The Tribunal also took support from the Supreme Court’s decision in Vidarbha Industries Power Ltd. v. Axis Bank Ltd [2022 SCC Online SC 841], which recognized that admission of a Section 7 petition is not automatic and the adjudicating authority may consider legitimate reasons to defer or decline admission in appropriate cases.

The Tribunal also dealt with the issue of unilateral cancellation of allotments by the Corporate Debtor. Letters dated 15.04.2024 and 19.04.2024 issued to several applicants cited non-payment of dues, but the Tribunal found these to be based on inflated and coercive demands. It noted that the amounts claimed disregarded delay compensation awarded by RERA and failed to account for the incomplete nature of the project and absence of completion or occupancy certificates. Referring to one such email dated 21.02.2024, the Tribunal observed that the Corporate Debtor had linked payment demands with withdrawal of legal proceedings, which reflected a mala fide intent to frustrate the insolvency proceedings.

The Tribunal held that such cancellations were ultra vires and in violation of Section 19 of the RERA Act, 2016. It restrained the Corporate Debtor from terminating allotments, demanding penal interest, or creating third-party rights in the flats during the pendency of the CIRP to preserve the status quo.

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Ultimately, the Tribunal admitted the petition under Section 7 of the IBC and allowed the proposal for implementation of the reverse CIRP model. It directed that the project be completed by the Corporate Debtor under the supervision of the IRP as per the structured plan, thereby safeguarding the interests of the homebuyers while maintaining the objectives of the Code.

Appearance

For the Applicants/FCs: Mr. Mohit Kr. Auluck, Advocate.

For the Respondent/CD: Mr. Saurabh Panedy, Advocate a.w. Mr. Akshat Aggarwal, Advocate.

Cause Title: S.K. Dutta (Swapan Kumar Dutta) V. Global Mega Ventures Private Limited

Case No: CP (IB) No.71/7/MP/2020 With IA No. 199/MP/2022, IA No. 45/MP/2024, and IA No. 271/MP/2024

Coram: Sh. Shammi Khan [Judicial Member], Sh. Sanjeev Sharma [Technical Member]