NCLT Kochi Holds That Homebuyers With Approved Project-Wise Plans Lose Stake In Corporate Debtor; Cannot Seek Restoration Of CoC
Pranav B Prem
The National Company Law Tribunal, Kochi Bench, has held that homebuyers whose claims have been settled through project-wise resolution plans lose their financial stake in the corporate debtor and, therefore, cannot seek restoration or reconstitution of the Committee of Creditors (CoC). A Bench comprising Judicial Member Vinay Goel and Technical Member Madhu Sinha dismissed an application filed by the Nova Castle Apartment Owners' Association and the Sanctuary Apartment Owners' Association, both representing homebuyers of two projects developed by Samson and Sons Builders and Developers Pvt. Ltd., and imposed costs on the applicants.
The petitioners had challenged the Resolution Professional’s decision to reconstitute the CoC after certain project-wise resolution plans were approved. The insolvency proceedings against Samson and Sons Builders involved multiple real estate projects in Kerala, and project-specific resolution plans were invited. Out of six plans received, four—relating to Angel Woods, Orchid Valley, Pearl Crest and Sharon Hills-I—were approved by the Tribunal in 2024. Upon approval, the Resolution Professional revised the CoC and removed creditors belonging to the completed projects, stating that they no longer had a financial interest in the corporate debtor.
The associations contended that they were excluded without notice and argued that their rights as financial creditors survived even after the approval of the project-wise plans. They alleged that the reconstitution was arbitrary, illegal and violative of natural justice. The Resolution Professional, however, maintained that once the resolution plans for some projects were approved, the homebuyers of those projects stood fully compensated and no longer had any residual stake in the corporate debtor. It was also pointed out that representatives of the applicants were present during the CoC meeting held on 31 August 2024, where reconstitution was included as an agenda item, and therefore could not challenge a decision taken in their presence.
The Tribunal agreed with the Resolution Professional and held that allowing homebuyers with settled claims to participate in decisions concerning the corporate debtor would be contrary to the basic framework of the Insolvency and Bankruptcy Code, 2016. It observed that CoC membership is dependent on the existence of a current financial stake. Once a homebuyer’s claim has been satisfied through an approved project-wise resolution plan, their interest in the corporate debtor ceases, and they cannot influence matters relating to remaining assets or pending projects.
The Bench held that the applicants had lost their locus after their project plans were approved and clarified that such homebuyers no longer fall within the definition of financial creditors for CoC purposes. The Tribunal emphasized that the entire structure of insolvency resolution is creditor-driven and requires that decisions be taken only by stakeholders with an active financial interest. Commenting on the applicants’ challenge, the Tribunal stated that if they had objections, they should have raised them during the CoC meeting where the agenda for reconstitution had been tabled.
In dismissing the application, the Tribunal held that restoration of the earlier CoC would “go against the basic spirit of the Insolvency and Bankruptcy Code, 2016.” It also imposed a cost of ₹1 lakh on the applicants, directing that the amount be deposited with the National Defence Fund.
Appearance
For Applicants: Advocate Bijoy Pulipra
For Respondent: Advocate Vinod P V
Cause Title: Nova Castle Apartment Owner's Association and Anr vs. K Parameshwaran Nair, RP, Samson and Sons Builders and Developers Pvt. Ltd.
Case No: CP (IBC)/05/KOB/2021
Coram: Judicial Member Vinay Goel, Technical Member Madhu Sinha
