NCLT Chennai Rejects Intervention Plea, Rules No Encumbrances Allowed on Corporate Debtor’s Assets Post-CIRP
Pranav B Prem
The National Company Law Tribunal (NCLT), Chennai Bench, comprising Sanjiv Jain (Judicial Member) and Ravichandran Ramasamy (Technical Member), has ruled that once the Corporate Insolvency Resolution Process (CIRP) is initiated, no encumbrances can be placed on the assets of the corporate debtor and all claims must be settled in accordance with Section 53 of the Insolvency and Bankruptcy Code, 2016 (IBC).
The order came in an intervention application filed under Section 60(5) of the IBC read with Rule 11 of the NCLT Rules, 2016, by Navneet Kumar Ranka and Babulal Ranka & Sons (HUF) seeking impleadment in a resolution plan approval application filed by the Resolution Professional (RP) of Lokaa Developer Pvt. Ltd. The applicants also sought directions to remand the resolution plan to the resolution applicant for treating them at par with other allottees.
Applicants’ Case
The applicants claimed to have entered into an unregistered sale and construction agreement with the corporate debtor in November 2017 for Apartment No. 1906 and paid ₹50,00,000. Alleging non-fulfilment of obligations, they approached the Tamil Nadu Real Estate Regulatory Authority (TNRERA), which in October 2023 directed the corporate debtor to refund the amount with 10.70% interest, ₹50,000 compensation, and to intimate the sub-registrar about the encumbrance created on the flat.
Following the commencement of CIRP on June 7, 2024, the applicants lodged a claim of ₹82,60,000 with the RP. They contended that their claim was wrongly categorised as “refund on cancellation” in the information memorandum and resolution plan documents, despite there being no voluntary cancellation. They further asserted that the encumbrance created by TNRERA should protect their rights over the flat until refund, and that RERA allottees could not be equated with operational creditors.
Respondents’ Stand
The RP argued that the applicants’ agreements were unregistered and the payments were made not to the corporate debtor but to its suspended director, resulting in no privity of contract. The apartment in question had been mortgaged to LIC Housing Finance and was later sold to another homebuyer after obtaining a no-objection certificate (NOC). The RP had also moved an application seeking annulment of the applicants’ claim. It was further submitted that the applicants themselves sought refund before TNRERA, and that their reliance on the Supreme Court’s ruling in Vishal Chelani & Others v. Debashis Nanda was misplaced, as the facts here were distinguishable.
Tribunal’s Findings
The tribunal noted that while the Supreme Court in Vishal Chelani had held that allottees obtaining RERA orders should still be treated as homebuyers under the IBC, the present case differed because:
The agreements were unregistered.
Payment was made to a suspended director, not to the corporate debtor.
The flat was already sold to another buyer after due NOC from LIC Housing Finance.
There was no valid title or registration in favour of the applicants.
It held that under Sections 10 and 25 of the Indian Contract Act, a contract without valid consideration is void. The tribunal also pointed out that the TNRERA proceedings were ex-parte, and key facts such as the prior sale were not brought to its notice. Importantly, it emphasised that once CIRP commences, Section 53 of the IBC governs claim resolution, and no encumbrances can subsist on the corporate debtor’s assets.
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Concluding that the applicants could not be categorised as financial creditors, and with the RP having sought to nullify their claim, the bench found no grounds to allow their intervention in the resolution plan proceedings. The application was dismissed with no order as to costs.
Appearance
For Applicant: S Kishandan
For Respondents: Ravi Rajagopalan Advocate
Cause Title: Navneet Kumar Ranka V. Ramakrishnan Sadasivan
Case No: INV.P/(IBC)/5/CHE/2025 In I.A.(IBC)(PLAN) 11(CHE)/2024 IN CP(IB)/124/CHE/2023
Coram: Sanjiv Jain [Judicial Member], Ravichandran Ramasamy [Technical Member]
