Home Buyers Interests Put Above All
In civil appeal No. 3778 of 2020 in the Supreme Court, the bench of Judges M.R. Shah and B.V. Nagarathna, in case of Amit Katyal V/S Meera Ahuja & others, allowed the withdrawal of Corporate Insolvency Resolution Process (CIRP) against a builder in an application filed by three homebuyers in view of a settlement plan agreed upon by the majority of them. In the larger interest of the homebuyers, the apex court exercised power under article 142 to permit withdrawal of the CIRP proceedings and set aside all matters pending between the parties. This order was passed on March 03, 2022.
Apex Court held the Insolvency and Bankruptcy Code (IBC), 2016 – The object and purpose of the IBC is not to kill the company and stop/stall the project, but to ensure that the business of the company runs as a going concern.
Dr Prem Lata
What is Article 142 of the Constitution of India?
The Indian Judiciary and the Constitution of India believe that every citizen of India must get “complete justice”. The Constitution of India under Article 142 grants the power to the Supreme Court for passing any decree to do “complete justice” Further, there is no specific guideline or rule provided by the law which explains when, where and under which circumstances the Apex Court can invoke the said article to do “complete justice”.
This was yet another way by which homebuyer’s interest is protected by making an arrangement to settle their disputes in a very short procedure before National Company Law Tribunal (NCLT). For years, home buyers were dependant on Consumer Commissions only for the redressal of their grievance and refund of their hard earned money invested with builders. Then came the RERA (Real Estate Regulation and Development) Act 2016, which came as an additional remedy to home buyers and made a remarkable change in the real estate sector. The amendment in section 5 of IBC 2016 made home buyers financial creditors which was another boost for consumers. With this, yet another window opened for investors in developers’ projects and now NCLT also came ahead in settling accounts between disputing parties.
The courts are creating history by adopting very positive approach towards the aggrieved consumers through number of judgments during the last decade which is a big relief to the general public at large. In the above case, the Hon’ble Supreme court has exercised its power under Art 142 of the constitution (which is done in rare cases) and given relief to both the parties, home buyers as well as the developers and brought an end to the litigation.
Details of the Case
Home buyers in the housing project, Krrish Provence Estate at Gurgaon had gone against Jasmine Buildmart Pvt and invoked Section 7 of IBC 2016 before the Adjudicating Authority/NCLT, Delhi in CP No. 1722/ND/2018 seeking initiation of CIRP against Builder, the Corporate Debtor and obtained order in their favour. NCLT/Adjudicating Authority admitted Section 7 application on 28.11.2019 and appointed the Interim Resolution Professional ‘IRP’ and declared a moratorium. The original applicants had sought refund of an amount of Rs.6, 93, 02,755/- due to an inordinate delay in the completion of the project and failure to handover possession within the stipulated time and could not complete the project even after a period of eight years. Builders knocked at Supreme Court’s door for stay on the insolvency proceeding against them as ordered by NCLT, in view of the fact that parties have settled the matter between themselves and the petitioner/home buyers be allowed to withdraw their application under section 7 of IBC 2016.
How was the Matter Resolved?
It was revealed before the Court that out of 128 home buyers of 176 units, 82 home buyers have settled the dispute with the corporate debtor including the original applicants/respondent nos. 1 to 3 who had initiated the IBC proceedings. It was reported that the original applicants/ respondent Nos.1 to 3 as well as 79 home buyers have settled the dispute with the corporate debtor in terms that the corporate debtor shall complete the entire project and hand over the possession to the home buyers who wanted possession within a period of one year from today. In view of this development and pursuant to order dated 4.2.2022, 1 to 3 original applicants before the NCLT who has initiated the proceedings under Section 7, filed an application for withdrawal of the proceedings. However, there is no provision in the Code or the CIRP Rules in relation to permissibility of withdrawal post admission of a CIRP application. In the present case, although the COC was constituted on 23.11.2020, there has been a stay of CIRP proceedings on 3.12.2020 (within ten days) and no proceedings have taken place before the COC. It is to be noted that the COC comprises 91 members, of which 70% are the members of the Flat Buyers Association who are willing for the CIRP proceedings being set aside, subject to the appellant and the Corporate Debtor – company honouring its undertaking given to this Court as per the settlement plan dated 3.2.2022. Therefore, in the peculiar facts and circumstances of the case, where out of 128 home buyers, 82 home buyers will get the possession within a period of one year, as undertaken by the appellant and respondent No.4 – Corporate Debtor, coupled with the fact that original applicants have also settled the dispute with the appellant, we are of the opinion that this is a fit case to exercise the powers under Article 142 of the Constitution of India read with Rule 11 of the NCLT rules, 2016 and to permit the original applicants to withdraw the CIRP proceedings.
The Jasmine Buildmart Pvt. Ltd. were directed to file separate undertakings before this Court, within a period of one week, specifically stating and undertaking that:
- They shall complete the entire project within one year from 01.03.2022 and offer the possession to the respective home buyers.
- They shall complete the entire project including all the apartments, common areas, amenities, etc.
- All demands be raised and timely paid.
- Company shall continue the provisions of all maintenance services.
- Company will make the application for obtaining Occupancy Certificate within six months, before the competent authority.