NCLAT Upholds Admission Of CIRP Against Pushp Ratna Realty
Pranav B Prem
In a significant ruling, the National Company Law Appellate Tribunal (NCLAT), Principal Bench at New Delhi, has upheld the initiation of the Corporate Insolvency Resolution Process (CIRP) against Pushp Ratna Realty Pvt. Ltd. The appeals filed by Jayshree Agnihotri and Ashok Kumar Jain—both part of the suspended management—were dismissed, affirming the rights of home-buyers to seek redressal under Section 7 of the Insolvency and Bankruptcy Code, 2016.
The Bench comprising Justice Ashok Bhushan (Chairperson), Barun Mitra and Arun Baroka (Technical Members), concluded that the application filed by ten home-buyers was not time-barred and did not suffer from any legal infirmity. It also held that the rejection of a settlement proposal by the Committee of Creditors (CoC), mainly comprising home-buyers, was justified and not arbitrary.
Genesis of the Dispute
The origin of the matter lies in a Memorandum of Understanding (MoU) executed on 14.09.2009 between the Agnihotri group (landowners) and the Jain group (builders), to develop a residential township over approximately 2 lakh square feet in Khajrana, Indore. Under the MoU, the project was to be developed through Pushp Ratna Realty Pvt. Ltd., with both groups holding equal (50:50) shareholding and board representation.
As per the terms, while the land was to be contributed by the Agnihotri group, the Jain group was to arrange construction and finance through bank loans. The Jain group was allowed to retain a portion of the saleable area as fees. The project was branded “Lush by Pushp Ratna,” and 77 out of 140 units were sold to home-buyers who were issued allotment letters promising possession within 30 months.
However, serious disputes emerged between the two groups. The Jain group claimed to have cancelled the MoU on 26.09.2011, but the Agnihotri group challenged the authenticity of the cancellation, alleging forgery. They initiated arbitration proceedings and obtained interim relief under Section 9 of the Arbitration and Conciliation Act from the District Court in 2019. The Madhya Pradesh High Court, in related proceedings, observed that the cancellation deed appeared to be a sham.
CIRP Initiated by Home-buyers
Frustrated by years of delay, a group of ten home-buyers approached the NCLT Indore Bench with a Section 7 application. An earlier application had been withdrawn due to limitation concerns, but the second application was filed on 22.05.2024, based on updated balance confirmations and audited financial statements.
The Adjudicating Authority admitted the petition on 16.10.2024, holding that the Corporate Debtor had committed default in handing over possession and that the application was within the limitation period. This led to three appeals: two by Jayshree Agnihotri and one by Ashok Jain.
Arguments on Limitation
Jayshree Agnihotri contended that the allotment letters dated between 2014 and 2016 had become time-barred and alleged that the Jain group had issued backdated balance confirmation letters to dummy allottees to circumvent limitation. Similar arguments were advanced by Ashok Jain, who claimed the allottees were speculative investors who had not fulfilled their obligations.
Rejecting these arguments, the NCLAT noted that the audited balance sheet of the Corporate Debtor as of 31.03.2020 contained entries under “Advances from customers against flat bookings,” amounting to over ₹3.87 crores. It was also pointed out that the same balance sheet had been relied upon by the Agnihotri group to assert their shareholding rights, making it untenable for them to now dispute its veracity.
Furthermore, a balance confirmation letter dated 09.11.2021 issued by the Corporate Debtor acknowledged the debt owed to a home-buyer, which, when read with the balance sheet, amounted to a valid acknowledgment under Section 18 of the Limitation Act. The Tribunal held that even without considering this acknowledgment, the exclusion of limitation period from 15.03.2020 to 14.03.2021—as per the Supreme Court’s suo motu order—meant the Section 7 application was well within time.
Allegations of Collusion Rejected
The appellants also alleged that the Section 7 application was collusive and orchestrated by the Jain group to wrest control of the land. They claimed that the home-buyers were acting in concert with the Jain group and that the CIRP was being misused as a tool in their inter se shareholder dispute.
The NCLAT rejected these claims, noting that while there were indeed settlement talks between the Agnihotri and Jain groups, the home-buyers had acted independently in pursuing insolvency proceedings due to the prolonged delay in possession. It found no merit in the allegation that the home-buyers were “dummy allottees” or that the petition was fraudulent.
The Tribunal observed: “The rights of the home-buyers cannot be sacrificed on account of inter se disputes between the shareholders... Delay in completion of the project was sufficient ground for the home-buyers to have lost confidence in both Agnihotri group and Jain group, triggering the filing of the Section 7 petition.”
Rejection of Settlement Proposal Upheld
Jayshree Agnihotri had submitted a proposal on 19.11.2024 to settle the claims of allottees in full or complete the project within 18 months. This proposal was placed before the CoC in its second meeting held on 03.12.2024 but was unanimously rejected.
While the Appellant argued that the CoC’s decision was arbitrary and relied on Swiss Ribbons and Anand Murti to assert the Tribunal’s power to override such rejections, the NCLAT held that the rejection was not arbitrary. The home-buyers, having waited for over a decade and faced revoked building permissions and stalled work, were justified in seeking resolution through new developers.
Quoting Pioneer Urban Land v. Union of India [(2019) 8 SCC 416], the Tribunal observed: “It is only such allottee who has completely lost faith in the management of the real estate developer who would come before NCLT under the Code hoping that some other developer takes over and completes the project.”
It also noted that both factions of the shareholders had acted irresponsibly, with construction halted in six out of nine towers and only 30–40% work done in the remaining ones. Given this backdrop, the Tribunal concluded that the settlement offers were not genuine attempts to resolve the crisis but efforts to retain control over valuable real estate.
Verdict
Finding no merit in any of the appeals, the NCLAT dismissed them in their entirety and vacated interim orders. The Tribunal upheld the admission of the Section 7 application and directed that the CIRP continue as per the provisions of the IBC. It reiterated that the interests of home-buyers, who had invested their savings and waited more than ten years, must be protected, and their right to seek resolution under the IBC cannot be obstructed by internal management disputes.
Appearance
For Jayshree Agnihotri (Appellant): Mr. Krishnendu Dutta, Sr. Advocate with Mr. Kumar Deepraj and Ms. Niharika Sharma, Advocates.
For Ashok Kumar Jain (Appellant): Mr. Ashish Batra, Advocate.
For Respondents: Mr. Abhijeet Sinha, Sr. Advocate with Ms. Heena Kochar, Advocates.
Mr. Sunil Fernandes, Sr. Advocate with Ms. Honey Satpal, Ms. Diksha Dadu, Mr. Kanishk Khullar and Ms. Heena Kochar, Advocates for R-2 to R-11.
Mr. Ashish Batra, Advocate for R-12 & R-13.
Cause Title: Jayshree Agnihotri vs. Nirmal Kumar Jain & Ors.
Case No: Company Appeal (AT) (Insolvency) No. 2112-2113 of 2024 with Company Appeal (AT) (Insolvency) No. 2335 of 2024
Coram: Justice Ashok Bhushan [Chairperson], Barun Mitra [Technical Member], Arun Baroka [Technical Member]
[Read/Download order]
