Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT) at New Delhi has held that a registered homebuyers’ association may initiate corporate insolvency proceedings on behalf of its members, but only when each homebuyer individually authorises it to act for them. A resolution passed merely by the society’s core committee is insufficient and does not meet the statutory requirement under Section 7 of the Insolvency and Bankruptcy Code (IBC). The tribunal therefore granted seven days’ time to the society to furnish individual authorisations from all 98 homebuyers.

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The ruling came in appeals filed by Sumer Radius Realty Private Limited and Sumer Buildcorp Private Limited challenging an order of the NCLT Mumbai, which had permitted Avenue 54 Welfare Association—a registered society representing 98 homebuyers of the Avenue 54 project in Mumbai—to maintain a Section 7 application alleging a default of ₹203.27 crore due to non-delivery of possession. The corporate debtors argued that the association was neither a financial creditor nor an authorised applicant under the Code and that the authorisation relied on by the society was only a core-committee resolution, not consent from the actual financial creditors.

Senior Advocates Arun Kathpalia and Krishnendu Dutta, appearing for the builders, submitted that the society could not step into the shoes of individual allottees, as the Central Government notification dated 27 February 2019 recognises only allottees themselves—and not their associations—as financial creditors for purposes of initiating CIRP. They contended that no debt was owed to the society as an entity and that no valid authorisation existed from the homebuyers empowering it to file proceedings on their behalf.

Appearing for the society, Senior Advocate Abhijeet Sinha argued that any defect in authorisation was merely procedural and could be rectified. He submitted that the association was willing to provide individual affidavits or letters of authority from each of the 98 buyers, but NCLT Mumbai did not permit this on the ground that the matter had already been heard and reserved for orders.

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The Appellate Tribunal examined Section 7 of the IBC and noted that a financial creditor may file an application either directly or through an authorised person. It observed that Form 1 under Rule 4 of the IBC Rules expressly contemplates a financial creditor acting through an authorised representative, meaning that a society could theoretically file a Section 7 application if properly authorised. However, the tribunal found that the resolution dated 23 January 2024 relied upon by the society could not be treated as authorisation by all 98 homebuyers, since it was passed only by the core committee members and not by the full body of allottees.

The Bench emphasised that in cases where a collective insolvency application is filed, the authorisation must emanate from each financial creditor on whose behalf the application is purportedly filed. It observed, “Any authorisation has to be by all the members on whose behalf the application is claimed to be filed,” adding that the society’s internal resolution could not substitute the individual consent of each homebuyer.

NCLAT further held that the NCLT erred in refusing to allow the society to cure the defect when it had expressly offered to furnish individual affidavits. The tribunal observed that procedural deficiencies should ordinarily be allowed to be corrected, especially when the statute itself permits applications to be made through authorised representatives. It added that the defect regarding authorisation was not substantive in nature and was capable of rectification.

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Accordingly, the tribunal disposed of the appeals by granting Avenue 54 Welfare Association seven days to file individual authorisations from all 98 homebuyers. It directed NCLT Mumbai to proceed with the Section 7 application after receiving the authorisations, leaving all other issues to be considered afresh by the adjudicating authority.

Appearance

For Appellant: Senior Advocate Krishnendu Dutta with Advocates Anne Mathew, Yash Tandon, Harshit and Jashan Vir Singh for Sumer Radius Realty; Senior Advocate Arun Kathpalia with Advocates Roy Abraham and Akhil Abrahim Roy for Sumer Buildcorp.

For Respondent: Senior Advocate Abhijeet Sinha with Advocates Nitya Shah, Kinnar Shah, Rhythm Buaria, Aditi Bhargava and Aridaman Raghav; Advocates Meghna Rao, Sujit Lahoti, Akshta Shah, Harish Karodia and Nidhi Jain, for Intervenors.

Cause Title: Sumer Radius Realty Pvt. Ltd. v. Avenue 54 Welfare Association with Sumer Buildcorp Pvt. Ltd. v. Avenue 54 Welfare Association.

Case No: Company Appeal (AT) (Insolvency) No. 1572 of 2025 with Company Appeal (AT) (Insolvency) No. 1573 of 2025

Coram: Chaiperson Justice Ashok Bhushan, Technical Member Barun Mitra