NCLT Indore: Execution of Sale Deed During CIRP Permissible If Possession Was Handed Over Before Its Commencement
Pramav B Prem
The National Company Law Tribunal (NCLT), Indore Bench comprising Mohan P. Tiwari (Judicial Member) and Sanjeev Sharma (Technical Member), has held that the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) does not prohibit the execution of sale deeds during the Corporate Insolvency Resolution Process (CIRP) if possession was handed over to the allottee prior to commencement of CIRP.
Background
The case involved JSM Devcons Pvt. Ltd. (Corporate Debtor), a company engaged in developing a housing project named Pinnacle D Dreams. The Corporate Debtor was admitted into CIRP following a Section 7 petition filed by Motel Rahans Pvt. Ltd. Subsequently, Devvrat Developers was approved as the Successful Resolution Applicant, and the Resolution Plan was modified after approval.The applicant, a homebuyer in the said project, had already taken possession of the flat before the initiation of CIRP. He approached the Tribunal seeking a declaration that the flat does not form part of the Corporate Debtor’s assets and requested directions to execute the sale deed in his favour.
Applicant’s Submissions
The applicant argued that:
He had received lawful possession of the flat before the CIRP commenced.
Since the property was already handed over, it cannot be considered an asset of the Corporate Debtor.
The moratorium under Section 14 IBC should not apply to such allottees.
The applicant relied on the NCLAT ruling in Pradip Kumar Chaudhuri v. Dagcon (India) Pvt. Ltd. (2020 SCC OnLine NCLAT 860), which held that the moratorium does not extend to properties where possession was already transferred to the allottee.
Respondent’s Submissions
The Respondent contended that:
The applicant did not file any claim before the Resolution Professional (RP) despite the public announcement.
The application was delayed by over 2.5 years, during which the resolution plan had been approved and was under implementation.
Once the Committee of Creditors (CoC) approves a resolution plan, no new claim can be entertained, as held in Vadilal Industries Ltd. v. Fanendra Munot & Ors (NCLAT, CA (AT) (Ins) No. 748 of 2023).
Tribunal’s Observations
The NCLT noted that:
As per precedents of the Supreme Court and NCLAT, flats or properties whose possession was handed over before the initiation of CIRP fall outside the asset pool of the Corporate Debtor.
The moratorium under Section 14 IBC does not restrict execution of sale deeds in such cases.
Even if the resolution plan was subsequently modified, it does not affect the rights of such allottees.
The Bench further emphasized that if substantial payment was made and possession delivered before CIRP, the homebuyer need not file a claim before the RP. The only remaining obligation is execution of the sale deed upon clearing any balance payment.
Tribunal’s Decision
The NCLT held that: “Execution of sale deeds during CIRP is permissible when possession of the property was lawfully handed over to the allottee prior to CIRP commencement.”The Tribunal also referred to the NCLT Jaipur Bench’s ruling in AU Small Finance Bank Ltd. v. Coral Infragold Pvt. Ltd. (IA No. 237/JPR/2021 in CP No. (IB)-170/7/JPR/2019), where registration of flats already allotted to homebuyers was allowed subject to statutory compliances. Accordingly, the application was allowed, and the NCLT directed the respondents to execute the sale deed in favour of the applicant.
Appearance
For Applicant: Mr. Rohit Dubey, Adv a.w. Ms. Raji Nema, Adv
For the OIC: Mr. Aditya (ACP, Vijay Nagar, Indore)
For the SRA: Mr. Ayush J. Rajani, Adv a.w. Mr. Keshav Khandelwal, Adv
Cause Title: Harminder Singh Bhatia V/s Devvrat Developers Pvt Ltd & Ors
Case No: IA/389(MP)2024 in C.P.(IB)/56(MP)2021
Coram: Mohan P. Tiwari (Judicial Member), Sanjeev Sharma (Technical Member)
