5 days ago
NCLT Says IBC Plans Override Individual Homebuyer Refund Claims
A group of homebuyers wanted their money back because their homes were not delivered.
They used a law called RERA to support their request.
But the housing project had entered a bankruptcy process under the IBC.
Most buyers in the project voted for a plan to resolve the company’s problems.
The tribunal said that plan can bind individual buyers, even if some want a different remedy.
It also said the IBC can override conflicting parts of other laws.
A new developer taking over the project does not automatically inherit every promise made by the old developer.
The decision gives more certainty to new investors but may limit individual buyers’ choices.
The NCLT Mumbai bench ruled that individual homebuyers cannot demand RERA refunds conflicting with an approved IBC resolution plan.
The ruling said IBC provisions prevail over inconsistent laws under Section 238 of the Code.
Homebuyers vote on insolvency plans as financial creditors, and majority decisions bind individual buyers.
Four Altavista buyers sought refunds after Spenta Enclave’s developer failed to deliver possession, but their plea was rejected.
The tribunal said a new developer taking over through insolvency is not automatically bound by every original contract term.
- Who
- The NCLT Mumbai bench, four homebuyers of Spenta Enclave’s Altavista project, and the project’s homebuyer class.
- What
- The tribunal rejected individual refund claims under RERA where they conflicted with an approved IBC resolution plan.
- Where
- The National Company Law Tribunal’s Mumbai bench.
- When
- The ruling was issued on September 9; the year was not specified.
- Why
- Because homebuyers’ majority vote supported the resolution plan and Section 238 of the IBC gives the Code priority over inconsistent laws.
Individual Homebuyer Rights
Insolvency Resolution Framework
Refund claims
Individual Homebuyer Rights
The four buyers argued that their Section 18 rights under RERA should protect their ability to seek refunds after possession was not delivered.
Insolvency Resolution Framework
The tribunal said individual buyers cannot demand a separate remedy when it conflicts with the resolution plan approved through the insolvency process.
Effect of majority voting
Individual Homebuyer Rights
Individual buyers may have different personal circumstances and contractual rights from the majority of the homebuyer class.
Insolvency Resolution Framework
Homebuyers are financial creditors under the IBC, and the majority decision of their class binds individual members.
New developer’s obligations
Individual Homebuyer Rights
Buyers may expect contractual terms agreed with the original developer to continue protecting their interests.
Insolvency Resolution Framework
The tribunal said a new developer taking over through insolvency is not automatically bound by every contractual obligation of the original developer.
Key facts
- Tribunal
- NCLT Mumbai bench
- Project
- Spenta Enclave’s Altavista project
- Applicants
- Four homebuyers
- Homebuyer voting share
- 22.66% in the committee of creditors
- Applicants’ voting share
- 0.22% collectively
- Relevant RERA provision
- Section 18
- Relevant IBC provision
- Section 238
Quotes
NCLT Mumbai bench
The Mumbai bench of the National Company Law Tribunal that issued the ruling
“It is also pertinent to note that the applicants’ claims as homebuyers stand admitted in the CIRP and their rights are governed by the treatment accorded under the resolution plan approved by the CoC. The applicants cannot insist upon a separate individualised remedy outside the framework of the insolvency process under the Code.”
financialexpress.com
“By virtue of Section 238 of the Code, the provisions of the Code prevail in case of any inconsistency with other enactments.”
financialexpress.com
Subodh Dandawate
Associate director for regulatory advisory at Nexdigm
“A resolution applicant taking over a project through insolvency cannot automatically be treated as having assumed every contractual obligation of the erstwhile developer. This strengthens predictability for investors and supports the objective of bringing credible capital into distressed assets.”
financialexpress.com
Sources
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